Digitized  by  tine  Internet  Archive 

in  2007  with  funding  from 

IVIicrosoft  Corporation 


http://www.archive.org/details/americanrailwayaOOadamrich 


AMERICAN 
RAILWAY  ACCOUNTING 


A   COMMENTARY 


BY 
HENRY  C.  ADAMS,  PH.D.,  LL.D. 

PROFESSOR  OP  POLITICAL  ECONOMY  AND  FINANCE  AT  THE 

UNIVERSITY  OF  MICHIGAN 

FROM    1887    TO    1911    IN    CHARGE    OF    THE    STATISTICAL 

AND  ACCOUNTING  WORK  OF  THE  INTERSTATE 

COMMERCE   COMMISSION 


NEW  YORK 

HENRY  HOLT  AND  COMPANY 

1918 


COPTHIOHT,    1918 
BT 

HENRY  HOLT  AND  COMPANY 


TO  THE  MEMBERS  OP  THE 

AMERICAN  ASSOCIATION  OF  RAILWAY  ACCOUNTING 
OFFICERS 

IN  REMEMBRANCE   OF  THEIR  EFFICIENT  CO-OPERATION 

IN  WORKING   OUT  A  SYSTEM   OP  ACCOUNTS 

FOR  AMERICAN   RAILWAYS 

IS  THIS  COMMENTARY  RESPECTFULLY  DEDICATED 


382942 


PREFACE 

It  was  my  original  purpose  to  write  a  book  under  the 
title,  "Railway  Accounts;  their  Abuses  and  their  Uses." 
This  purpose  was  modified,  primarily  because  such  a 
treatment  of  the  subject  would  have  been  ^unduly  contro- 
versial. It  would  have  led  to  a  criticism  of  most  that  has 
been  done  relative  to  rate  regulation  since  that  unfortunate 
decision  of  Smyth  v.  Ames.  The  controversial  side  of 
railway  accounts  carries  with  it  too  many  independent 
interests,  to  be  covered  by  a  book  the  chief  aim  of  which 
is  to  explain  accepted  accounting  rules,  and,  by  so  doing, 
to  make  clear  what  is  meant  by  a  scientific  system  of 
accounts. 

The  second  phase  of  the  original  title  met  with  a  similar 
fate.  To  consider  the  many  uses  of  a  well  devised  system 
of  accounts,  would  raise  most  of. the  problems  involved 
in  industrial  statistics.  This,  too,  covers  a  field  of  analysis 
of  suflScient  importance  to  claim  individual  treatment,  and, 
for  this  reason,  a  consideration  of  the  uses  as  well  as  the 
abuses  of  business  records  was  set  aside.  What  remains 
is  not  very  extensive,  so  far  as  the  text  is  concerned,  but 
it  is  dominated  by  a  single  purpose.  It  is  a  Commentary 
on  the  standard  system  of  railway  accounts  promulgated 
for  and  used  by  American  railways. 

It  is  hoped  that  this  simple  analysis  of  a  standardized 
system  of  business  records  will  prove  helpful  to  three 
classes  of  readers. 

First.  That  large  body  of  men,  mostly  young  men,  who 
are  coming  to  see  in  the  truthful  keeping  of  records  a  sol- 


vi  PREFACE 

vent  for  current  industrial  problems,  will  find  in  this 
Commentary  some  help  to  a  better  understanding  of  their 
vision  into  the  future.  Accounting,  at  last  analysis,  is  the 
determination  of  relative  equities;  and,  consequently,  it  is 
an  instrument  by  which  the  aspirations  of  peace-loving 
democracies  may  be  reahzed.  This,  at  least,  is  the  idea 
that  the  author  has  kept  constantly  in  view.  It  is  the 
source  of  his  personal  interest  in  the  science  of  accounts. 

Second.  The  American  system  of  railway  accounts  is 
known  and  consulted  by  accounting  experts  in  many  lands. 
Accountants  in  China,  Japan,  New  Zealand,  Canada,  and 
some  of  the  South  American  and  South  African  states, 
desire  to  learn  what  this  country  is  doing,  as  a  help  to 
the  solution  of  their  local  problems.  It  is  for  this  class  of 
readers,  primarily,  that  the  Appendices,  which  reprint 
the  Classifications  promulgated  by  the  Interstate  Com- 
merce Commission,  are  inserted. 

Third.  It  is  expected  that  practical  accountants  who 
have  charge  of  the  records  of  public  service  industries  of 
all  sorts,  will  find  in  the  analysis  here  presented,  some 
points  of  interest  and  possibly  of  profit.  Especially  the 
younger  railway  accountants,  those  who  did  not  take 
part  in  that  nation-wide  symposium  of  1907  to  1910,  out 
of  which  American  railway  accounting  emerged  as  a 
standardized  system,  will  find  in  this  book  an  explanation 
of  many  of  the  rules  they  now  apply. 

University  students,  also,  whose  chief  purpose  is  to 
understand  commercial  relations,  will  read  with  interest 
the  pages  that  follow,  for  these  pages  aim  to  show,  by 
numerous  examples,  that  all  sound  accounting  rules  reflect 
the  nature  of  the  self-determining  laws  of  business  life. 

H   C   A 

Twin  Oaks,  February,  1918.  * 


CONTENTS 

CHAPTER  I 
THE  TASK  OF  THE  RAILWAY  ACCOUNTANT 

PAGE 

§    1.  The  Background  of  Railway  Accounts 4 

§   2.  Scope  and  Purpose  of  Railway  Accounting 9 

§   3.  The  Accountant  as  an  Historian 13 

§   4.  Conclusions  of  an  Accounting  Statement 13 

§    5.  The  CompeUing  Character  of  an  Accounting  Rule 16 

§   6.  Dual  Responsibihty  of  kn  American  Railway  Accountant  19 

CHAPTER  11 

STRUCTURE  OF  A  SYSTEM  OF  RAILWAY  ACCOUNTS 

§   7.  Agencies  of  Transportation 22 

§   8.  The  Accountant's  Definition  of  a  Steam  Railway 25 

§   9.  Analysis  of  Railway  Functions 29 

§  10.  The  Classification 36 

CHAPTER  III 

CONSTRUCTION  COSTS  PRIOR  TO  OPERATION 

§  11.  Close  of  Original  Construction  Records 40 

§  12.  Analysis  of  the  Classification 41 

§  13.  Does  Cost  Measure  Investment? 45 

§  14.  The  Basis  of  Construction  Charges 47 

§  15.  Labor  and  Material 49 

§  16.  Real  Estate 50 

§  17.  Interest  and  Discount 52 

§  18.  Depreciation  during  Construction 57' 

§  19.  Credits  during  Construction 61 

§  20.  Clearing  Accounts  in  Construction  Accounts 64 

vii 


viii  CONTENTS 

CHAPTER  IV 

CONSTRUCTION  ACCOUNTS  SUBSEQUENT  TO 
OPERATION 

PAGE 

§  21.  The  Significance  of  Terms 68 

§  22.  Occasions  for  Additions  and  Betterments 70 

§  23.  Relation  to  Operating  Expenses 73 

§  24.  Treatment  of  Renewals  at  Increased  Prices 74 

§  25.  Treatment  of  Renewals  by  the  Substitution  of  Improved 

Types 76. 

§  26.  Abandoned  Property  Charged  to  Operating  Expenses. ...  78 

§  27.  Abandoned  Property  charged  to  Surplus 82 

§  28.  Minimum  for  Additions  and  Betterments 84 

CHAPTER  V 

OPERATING  EXPENSES 

§  29.  Definition  of  Operating  Expenses 86 

§  30.  Meaning  of  the  General  Accounts 87 

§  31.  Meaning  of  the  Word  Maintenance 91 

§  32.  Depreciation 94 

§  33.  The  Rate  of  Depreciation 99 

§  34.  Adjustment  of  Depreciation  Reserves 102 

§  35.  Joint  Facihty  Accounts 104 

CHAPTER  VI 

OPERATING  REVENUES 

§  36.  Definition  of  Operating  Revenue 109 

§  37.  The  General  Revenue  Accounts 115 

§  38.  Two  Considerations  Involved 121 

CHAPTER  VII 

THE  INCOME  ACCOUNT 

§  39.  Definition  of  the  Income  Account 126 

§  40.  Form  of  Income  Statement 127 

§  41.  Treatment  of  Taxes 130 


CONTENTS  ix 

PAGE 

§  42.  Treatment  of  Rents 132 

§  43.  Other  Income  Credits 142 

§  44.  Income  Debits 145 


CHAPTER  VIII 

PROFIT  AND  LOSS  ACCOUNTS 

§  45.  Definition  of  Profit  and  Loss 148 

§  46.  Profit  and  Loss  Entries  Classified 152 

§  47.  Classification  of  Appropriations 156 

CHAPTER  IX 

GENERAL  BALANCE  SHEET  ACCOUNTS 

§  48.  General  Balance  Sheet  Defined 163 

§  49.  The  General  Accounts 164 

§  50.  The  Balance  Sheet  Statement 168 

§  51.  Analysis  of  Investments 171 

§  52.  Analysis  of  Capital  Liabilities 177 

§  53.  Current  Assets  and  Current  Liabilities 179 

§  54.  Items  Classed  as  "Deferred"  and  "Unadjusted" 183 

§  55.  The  Corporate  Surplus " 188 

APPENDIX  A 

CLASSIFICATION  OF  INVESTMENTS  IN  ROAD  AND 
EQUIPMENT 

General  Instructions: 

List  of  Construction  Accounts 193 

1.  Accounts  for  investment  in  road  and  equipment 196 

2.  Items  to  be  charged 196 

3.  Basis  of  charges 198 

4.  Cost  of  construction 199 

5.  Excavated  material 202 

6.  Items  to  be  credited 202 

7.  Property  retired  and  replaced 202 

8.  Property  retired  and  not  replaced 203 

9.  Equipment  retired 204 


X  CONTENTS 

PAGE 

10.  Land  retired 204 

11.  Adjustments  for  converted  property 204 

12.  Expenses  in  connection  with  additions  and  betterments.  205 

13.  Interpretation  of  item  lists 205 

14.  Submission  of  questions 206 

Construction  Accounts: 

Text  for  road  accounts 206 

Text  for  equipment  accounts 234 

Text  for  general  construction  expenditures 241 

APPENDIX  B 

CLASSIFICATION  OF  OPERATING  REVENUES  AND 
OPERATING  EXPENSES 

General  instructions:  page 

1.  Operating  accounts 247 

2.  Unaudited  items  affecting  operating  accounts 249 

3.  Delayed  items 249 

4.  Miscellaneous  operations 250 

5.  Submission  of  questions 250 

Operating  revenue  accounts 250 

Special  instructions 252 

Text  for  operating  revenue  accounts 253 

Operating  expense  accounts 269 

Special  instructions 275 

Text  for  operating  expense  accounts 289 

APPENDIX  C 

CLASSIFICATION  OF  INCOME,  PROFIT  AND  LOSS, 
AND  BALANCE  SHEET  ACCOUNTS 

General  instructions 399 

List  op  income  accounts 401 

Special  instruction  for  income  accounts 402 

Text  pertaining  to  income  accounts 403 

List  op  profit  and  loss  accounts 421 

Special  instructions  for  profit  and  loss  accounts 421 

Text  pertaining  to  profit  and  loss  accounts 422 

List  op  general  balance-sheet  accounts 428 

Special  instructions  for  balance-sheet  accounts 431 

Text  pertaining  to  general  balance-sheet  accounts 436 


AMERICAN    RAILWAY    ACCOUNTING 


CHAPTER  I 
THE  TASK  OF  THE  RAILWAY  ACCOUNTANT 

The  task  of  the  railway  accountant  is  the  same  in  kind, 
so  far  as  general  principles  and  range  of  responsibilities 
are  concerned,  as  that  of  the  accountant  of  any  other 
large  business.  Familiarity  with  the  basic  principles  and 
general  rules  of  accounting  are,  therefore,  assumed  for 
the  readers  of  this  treatise,  and  those  points  only  which 
are  characteristic  of  a  system  of  railway  accounts  will  be 
discussed  with  any  degree  of  completeness.  It  is  assumed, 
for  example,  that  the  reader  knows  the  double  entry- 
method  of  keeping  business  records,  and  the  reason  why 
this  is  the  correct  method;  that  he  understands  the  use 
of  debits  and  credits  in  accounting  analysis;  that  he  can 
interpret  an  accounting  balance  and  reason  from  a  com- 
parison of  balances;  and  that  he  appreciates  the  signifi- 
cance of  assigning  an  accounting  personality  to  an  operat- 
ing period,  to  an  operating  division  or  process,  to  the 
parties  mentioned  in  a  contract,  or  to  the  properties 
covered  by  the  operating  management  of  a  system.  These 
ideas,  as  well  as  the  use  of  clearing  accounts,  suspense 
accounts,  arbitraries  and  weighted  averages,  will  not  be 
considered  in  this  treatise,  unless  they  come  up  in  the 
discussion  of  some  special  accounting  problem.  These 
things  are,  or  should  be,  the  common  knowledge  of  every 
accountant. 

It  may  also  be  assumed  that  the  reader  has  an  appre- 
ciative  understanding   of  that   complex   business   unit 

s 


4         AMERICAN  RAILWAY  ACCOUNTING 

known  as  a  railway,  whose  operations  and  transactions 
a  system  of  railway  accounting  undertakes  to  record.  On 
this  latter  point,  however,  a  cursory  explanation  may  not 
be  out  of  place  as  suggesting  the  peculiar  task  imposed 
upon  a  railway  accountant.  Such  an  explanation  may 
be  found  in  what  follows. 

§  1.  The  Background  of  Railway  Accounts. — In  the 
first  place,  it  should  be  recognized  that  transporta- 
tion in  the  United  States  is  in  fact,  though  not  in  form, 
an  organized  service  unit.  Railway  construction  as  well 
as  railway  equipment  is  fairly  well  standardized,  and, 
within  broad  lines,  internal  as  well  as  external  manage- 
ment conforms  to  uniform  rules.  Greater  uniformity  in 
operating  methods  would  not  be  practiced  were  the  rail- 
ways of  this  country  the  property  of  a  single  corporation 
or  of  the  federal  government.  From  this  it  is  evident 
that  a  railway  accountant  must  keep  his  records  in  such  a 
manner  that  the  balances  which  they  show  can  be  readily 
combined  with  corresponding  balances  of  other  companies. 
Abihty  to  make  combinations  and  comparisons  is  one  of 
the  tests  of  sound  railway  accounting. 

This  tendency  towards  a  unified  system  is  not  primarily 
due  to  the  fact  that  the  federal  and  state  governments 
exercise  supervisory  jurisdiction  over  railways.  It  lies 
very  largely  in  the  nature  of  the  case  and  is  the  result  of 
several  tendencies  and  conditions.  Thus,  provision  for 
interchange  of  freight,  and  a  desire  to  eliminate  reloading 
for  through  freight,  is  responsible  for  the  standardization 
of  equipment  and,  to  a  certain  extent,  for  standardiz- 
ing the  track.  The  struggle  for  economy  and  efficiency, 
also,  results  in  the  extensive  use  of  joint  facilities  and  the 
employment  of  joint  employees,  both  of  which  tend  tiO 


THE  TASK  OF  THE  RAILWAY  ACCOUNTANT    5 

the  standardization  of  administrative  rules.  The  fact 
that  the  same  express  companies,  fast  freight  lines,  termi- 
nal and  lighterage  companies,  as  well  as  the  Postoffice 
Department  and  the  Pullman  Company,  operate  in  con- 
nection with  independent  railway  lines,  tends  to  the 
general  adoption  of  uniform  contracts  and  operating 
arrangements.  Indeed,  it  is  not  too  much  to  say  that, 
from  the  operating  standpoint,  business  necessity  forces 
independent  railways  to  administer  their  properties  very 
much  as  though  they  were  a  single  property. 

This  unity  is,  in  part,  the  result  of  conscious  effort  on 
the  part  of  railway  officials.  Transportation  is  a  highly 
specialized  business,  and  has  been  developed  under  the 
influence  of  the  scientific  spirit.  There  are  in  this  country 
more  than  an  hundred  associations  of  railway  officials 
whose  purpose  it  is  to  discuss  the  scientific  and  operating 
problems  which  arise  in  the  administration  of  a  railway 
property,  and  to  bring  the  experience  of  every  property 
to  bear  upon  the  operation  of  every  other  property.  Al- 
though these  associations  have  no  definite  authority,  the 
rules  they  lay  down  are  generally  followed.  The  Ameri- 
can Railway  Association,  the  Master  Car  Builders'  Asso- 
ciation, the  Claim  Agents'  Association,  and  the  Account- 
ing Officers'  Association,  may  be  accepted  as  types  of  the 
many  railway  associations  that  exist,  each  of  which  stands 
for  a  particular  function  in  the  application  of  the  princi- 
ples of  division  of  labor  to  railway  transportation,  and 
each  of  which  exerts  a  conscious  influence  on  the  unifica- 
tion of  railway  methods.  All  this  stands  back  of  and 
gives  character  to  the  task  of  the  railway  accountant. 

In  the  second  place,  it  should  be  noted  that  the 
unit  of  railway  operation  is  the  railway  system  and  not 


6         AMERICAN  RAILWAY  ACCOUNTING 

the  railway  corporation.  How  these  systems  grew  may 
be  a  matter  of  secondary  importance,  but  the  legal  forms 
by  which  they  are  held  together;  the  agreements  for  the 
distribution  of  system  revenues;  the  contracts  that  define 
the  relation  of  railways  to  mining,  lumbering,  and  other 
lines  of  business  covered  by  railway  capital;  the  adminis- 
trative rulings  that  pertain  to  the  hundred  and  one  opera- 
tions ancillary  to  the  management  of  a  great  railway  prop- 
erty; these,  and  many  other  significant  features  that 
might  be  mentioned,  are  of  prime  interest  to  the  account- 
ant because  they  control  his  system  of  records.  These 
contracts,  agreements,  arrangements,  and  administrative 
rulings  give  rise  to  inter-corporate,  inter-divisional,  and 
inter-industrial  accounting.  An  illustration  of  each  may 
not  be  out  of  place. 

Inter-corporate  accounting  covers  the  contractual  agree- 
ments or  understandings  by  which  a  system  is  organized 
and  held  together.  The  figures  set  down  by  the  account- 
ant are  such  as  bear  on  the  relative  equities  of  the  con- 
stituent parts  of  the  system.  Thus,  a  separation  of  the 
earnings  and  expenses  of  subsidiary  lines  from  those  of 
the  parent  line,  may  be  required  in  order  to  execute  the 
contract  involved.  A  similar  separation  may  be  required 
for  fixed  charges  and  certain  revenues.  The  improvements 
on  leased  property  paid  for  by  the  lessee  give  rise  to  ac- 
counting problems  that  are  not  easily  solved.  The  use 
of  constructive  mileage  and  arbitraries  of  all  sorts  in  the 
execution  of  contractual  agreements  further  illustrates 
what  is  meant  by  inter-corporate  accounting. 

Inter-divisional  accounting  is,  in  some  of  its  features, 
like  inter-corporate  accounting  except  that  it  is  directed 
primarily  by  the  needs  of  operating  officials.    It  undertakes 


THE  TASK  OF  THE  RAILWAY  ACCOUNTANT    7 

to  locate  revenues  and  expenses,  as  indeed  the  benefits 
and  the  burdens  of  all  transactions  that  appertain  to 
branch  lines  or  operating  divisions.  It  aims  to  measure 
efficiency  or  economy  and  to  compare  actual  results  with 
established  standards.  Under  inter-divisional  account- 
ing, also,  are  included  many  administrative  functions,  as, 
for  example,  the  administration  of  a  car  pool  for  cars 
owned  by  or  assigned  to  particular  parts  of  the  system. 
This  branch  of  accounting  offers  many  opportunities  for 
originality  and  experiment.  It  is  closely  alUed  to  the 
work  of  a  railway  statistical  bureau. 

Inter-industrial  accounting  brings  to  notice  three 
classes  of  operating  relations.  It  has  to  do  with  those 
business  relations  that  exist  between  a  railway  and  trans- 
portation agencies  not  covered  by  railway  capital^  but 
which  co-operate  with  the  railway  in  rendering  the  serv- 
ice of  transportation.  Express  companies,  telegraph' 
companies,  boat  lines,  belt  and  switching  lines,  transfer 
companies,  and  the  like,  are  agencies  of  this  sort.  It 
embraces  that  long  list  of  business  undertakings  ancillary 
to  the  business  of  a  railway  such  as  ice  plants,  light  and 
power  plants,  stock  pens,  elevators,  bridges,  ferries,  termi- 
nal properties,  and  many  kinds  of  joint  facilities.  Whether 
the  property  of  such  business  undertakings  are  owned 
by  the  railway  or  not,  the  accountant  must  recognize 
each  as  a  party  to  a  contract  or  operating  arrangement, 
either  actual  or  impUed.  And,  finally,  inter-industrial 
accounting  covers  all  those  complicated  agreements  which 
trunk  line  railways  enter  into  with  industrial  or  manufac- 
turing railways. 

It  is  evident  from  the  foregoing  that  numerous  problems 
are  involved  in  the  organization  and  the  activities  of  a 


8         AMERICAN  RAILWAY  ACCOUNTING 

railway,  all  of  which  give  character  to  and,  in  large  meas- 
ure, control  current  records.  Every  link  that  binds  to- 
gether a  railway  system  must  be  known  to  the  railway 
accountant,  for  without  a  detailed  and  accurate  knowledge 
of  the  way  in  which  the  system  is  held  together,  he  will 
not  be  able  to  combine  inter-property  and  inter-service 
records  so  as  to  measure  accurately  the  equities  of  the 
various  factors,  or  to  prepare  a  truthful  statement  of 
the  operation  of  the  property  as  a  whole.  The  railway 
system  and  all  that  the  history  of  such  a  system  implies, 
stands  back  of  and  gives  character  to  the  task  of  the  rail- 
way accountant. 

It  must  be  recognized,  in  the  third  place,  that  rail- 
ways are  pubUc  service  industries  and  on  this  accoimt 
are  subject  to  the  supervision  and  control  of  the  govern- 
ment. Statute  laws  and  court  interpretations  are  ac- 
cepted facts  in  railway  administration,  and  many  of  the 
pubKc  questions  that  arise  cannot  be  answered  except  on 
the  basis  of  a  quantitive  measurement  of  the  pubHc  and 
private  interests  involved.  But  this  quantitive  measure- 
ment must  be  taken  from  the  records.  Its  statement  must 
be  an  accoimting  statement.  It  thus  becomes  evident 
that  the  statutes  of  the  federal  government,  the  laws  of 
the  states,  the  ordinances  of  municipalities,  as  well  as  the 
rulings  of  the  courts  in  the  interpretation  of  such  statutes, 
laws,  and  ordinances,  must  be  known  to  the  railway  ac- 
countant in  order  that  his  records  may  be  so  organized 
as  to  enable  him,  easily  and  without  great  expense,  to 
set  forth  the  private  and  proprietary  interests  involved 
in  the  claims  urged  by  the  government  with  regard  to  this 
class  of  property.  Indeed,  the  general  policy  of  the  gov- 
ernment, so  far  as  it  rests  on  the  fact  that  railway  prop- 


THE  TASK  OF  THE  RAH^WAY  ACCOUNTANT    9 

erty  is  imposed  with  a  public  interest,  stands  back  of 
and  gives  character  to  the  task  of  the  railway  ac- 
countant. 

§  2.  Scope  and  Purpose  of  Railway  Accounting. — 
The  end  held  in  view  by  the  railway  accountant,  like 
the  character  of  th*^  principles  and  the  nature  of  the  re- 
sponsibilities which  he  recognizes,  is  much  the  same  as 
that  covered  by  the  purpose  of  any  well  administered 
system  of  accounts.  Accounting  considered  in  its  broad 
sense,  and  defined  in  such  manner  as  to  emphasize  its 
fimdamental  principles,  is  made  up  of  a  series  of  entries 
and  statements  leading  to  definite  conclusions.  It  covers 
the  recording  of  business  transactions  and  the  interpreta- 
tion of  financial,  operating,  and  statistical  records.  While 
industries  were  small,  no  general  or  comprehensive  system 
of  accounts  was  necessary.  It  was  then  possible  for  the 
individual  manager  to  hold  in  mind  all  the  essential  facts 
for  successful  management. 

With  greater  industries,  however,  success  depends  upon 
specialized  efforts,  and  upon  the  eflScient  adjustment 
of  many  apparently  inconsistent  lines  of  activity.  Under 
such  conditions,  comprehensive  records  are  essential  in 
order  to  test  and  to  compare  results.  This  is  especially 
true  of  the  railway  industry  which,  in  addition  to  extensive 
specialization  on  the  part  of  officials  and  extensive  applica- 
tion of  the  principle  of  division  of  labor  for  the  assign- 
ment of  work  to  employees,  carries  on  its  rolls  agents 
scattered  over  broad  territories,  who,  on  this  account, 
are  obliged  to  work  independently  of  the  personal  super- 
vision of  superior  officers.  Under  such  conditions,  the 
management  must  bring  to  its  aid  a  system  of  accounts 
which  becomes  the  eyes,  the  ears,  the  memory,  and,  to  a 


10       AMERICAN  RA.ILWAY  ACCOUNTING 

large  extent,  the  analysis  and  the  reasoning,  of  a  success- 
ful administration. 

Further  Hght  is  thrown  upon  the  character  of  an  ac- 
countant's task  by  the  observation  that  every  accounting 
statement  is  a  direct  or  an  implied  argument.  Account- 
ing is  a  process  of  reasoning  and,  as  such,  is  subject  to  the 
strict  rules  of  formal  logic.  The  language  of  which  the 
accountant  makes  use  is  the  language  of  figures.  His 
underlying  conception  is  that  of  a  mathematical  equation. 
For  this  reason,  the  responsibilities  of  an  accountant  de- 
mand an  exactness  in  classification  and  definition  equal 
to  that  which  is  required  in  any  field  of  scientific  inquiry. 

The  above  observation  discloses  the  peculiar  demands 
of  an  accountant's  task.  The  argument  contained  in  an 
accounting  statement  is  worthless,  unless  it  can  be  checked, 
step  by  step,  against  original  entries  which  in  themselves 
are  trustworthy.  A  comprehensive  statement  made  up 
of  a  combination  of  a  million  debit  and  credit  transactions, 
may  be  rehed  upon  for  correct  conclusions  on  one  condi- 
tion, and  one  condition  only.  Every  field  note,  every 
voucher  entry,  every  original  paper,  must  be  made  out 
according  to  standardized  definitions  and  entered  and 
compiled  under  carefully  drawn  classifications.  The 
accountant  who  does  not  know  field  work,  or  whose  in- 
structions fail  to  cover  expHcit  rules  for  original  entries 
or  journal  transfers,  does  not  properly  appreciate  the 
exacting  nature  of  his  profession.  It  is,  therefore,  neces- 
sary to  include,  in  a  satisfactory  characterization  of  the 
scope  and  purpose  of  railway  accounting,  a  complete  and 
an  exhaustive  analysis  of  the  business  functions  to  which 
these  accounts  pertain,  and  a  set  of  definitions  which  will 
ensure  congruous  classifications. 


THE  TASK  OF  THE  RAILWAY  ACCOUNTANT     1 1 

It  is  quite  possible  that  the  above  portrayal  of  the  task 
of  a  railway  accountant,  lays  too  great  stress  on  the  under- 
lying philosophy  of  business  management.  It  would, 
of  course,  be  improper  to  so  emphasize  the  record  as  to 
over  look  the  immediate  aim  or  purpose  of  business  ac- 
counting. This  possibility  was  brought  to  the  attention 
of  the  author  by  a  criticism  on  the  manuscript  of  this 
chapter  by  an  accountant  of  one  of  the  leading  railways 
of  this  country.    His  criticism  is  worth  quoting.    He  says: 

''You  have  quite  a  different  point  of  view  than  the 
ordinary  Accountant  or  Auditor.  The  purpose  of  the 
revenue  accounts  is  to  secure  the  revenue  accruing  as  the 
result  of  the  activities  of  the  corporation.  All  accounting 
methods  have  as  a  purpose  to  'get  the  money.'  Thus, 
a  freight  waybill  is  reported  to  the  Auditor  by  the  Agent 
at  the  originating  station  and  also  by  the  destination 
station.  The  Auditor  thus  secures  the  information  upon 
which  he  requires  the  remittance  of  the  revenue  (if  pre- 
paid from  the  original  station  and  if  collected  from  the 
destination  station).  The  checking  done  by  the  Auditor 
is  not  so  much  to  secure  a  correct  record  and  complete 
report,  as  to  secure  the  entire  revenue  through  the  means  of 
these  reports,  and  incidentally  he  secures  a  correct  record." 

The  point  urged  by  this  criticism  is  readily  acknowl- 
edged. The  primary  task  of  an  accounting  department 
is  to  audit  revenues  and  check  expenses  and,  until  ade- 
quate provision  is  made  for  the  accompUshment  of  this 
task,  it  would  be  useless  to  consider  the  philosophy  that 
lies  in  accounting  records,  or  the  scientific  character  of 
classifications.  It  may,  however,  be  questioned  whether 
or  not  the  record  thus  "incidentally'*  secured  from  the 
routine  of  primary  audits  will  prove  to  be  a  practicable 


12       AMERICAN  RAILWAY  ACCOUNTING 

or  a  helpful  method  for  testing  current  operations  or  for 
outlining  future  policies.  Such  records  do  not  come  of 
themselves:  on  the  contrary,  they  are  the  product  of 
extensive  study  and  infinite  care.  In  any  case,  it  is  this 
narrower  phase  of  the  process  of  railway  accounting  that 
claims  the  chief  attention  of  the  present  discussion.  The 
author  does  not  feel  that  his  study  or  experience  is  worth 
much  in  the  practical  management  of  a  railway  auditor's 
office.  This  book  is  a  commentary  and  deals  with  fun- 
damentals. 

The  responsibilities  of  the  railway  accountant  have 
been  identified  for  so  many  years  with  the  task  of  the 
bookkeeper  that  it  seems  necessary,  at  the  outset  of  .a 
treatise  deahng  with  railway  accounts,  to  thus  emphasize 
the  unique  position  which  the  accountant  occupies  in 
the  organization  and  administration  of  a  great  industry. 
The  accountant  stands  at  the  center  of  an  organized  in- 
dustry; every  transaction  passes  through  his  hands;  every 
problem  must  receive  the  imprint  of  his  mind,  for  it  is 
he  who  supplies,  in  concrete  form,  the  information  upon 
which  rehance  must  be  placed  for  deciding  administrative 
poUcies.  No  other  single  officer  of  a  great  industry  is 
required  by  virtue  of  his  official  position  to  know  as  much 
of  all,  operations  in  all  departments  as  the  accounting 
officer.  This  is  the  explanation  of  a  very  significant  fact 
disclosed  by  the  recent  history  of  great  industries;  namely, 
that  of  the  development  of  the  bookkeeper  into  an  execu- 
tive officer.  The  modern  railway  accountant  is  no  longer 
a  clerk  whose  duty  it  is  to  keep  records  according  to  in- 
structions received  from  others.  On  the  contrary,  he  has 
become  a  critic,  responsible  for  detecting  unnecessary 
wastes  in  operation,  and  for  testing  the  efficiency  of  cur- 


THE  TASK  OF  THE  RA^H^WAY  ACCOUNTANT     13 

rent  administration.  He  is  responsible,  also,  for  exposing 
incompetence,  whether  of  departments  or  of  policies,  and 
for  pointing  out  those  tendencies  in  the  business  world, 
the  recognition  of  which  is  essential  to  the  successful 
administration  of  a  property.  It  is  no  accident,  therefore, 
that  the  railway  accountant  of  to-day  is  classed  among 
the  higher  executive  officials  in  the  organization  of  Ameri- 
ican  railways. 

§  3.  The  Accountant  as  an  Historian. — Since  accounts 
are  records  of  current  transactions,  it  follows  that  the 
books  kept  by  the  accountant,  provided  they  are  properly 
kept,  furnish  a  large  part  of  the  material  out  of  which 
the  development  of  a  railway  may  be  written.  These 
records,  taken  in  connection  with  the  minutes  of  the 
Board  of  Directors,  are,  or  should  be,  an  authoritative 
history  of  the  property.  It  is  a  serious  reflection  upon 
the  manner  in  which  an  accountant  has  performed  his 
appointed  task,  should  his  books  prove  to  be  either  in- 
complete or  inaccurate  records  of  the  growth  of  the  prop- 
erty to  which  they  pertain.  From  this  point  of  view, 
the  accounting  records  of  American  railways  are  open 
to  the  most  serious  criticism.  Construction  accounts, 
for  example,  are  not  satisfactory  when  used  in  the  general 
balance  sheet  statement,  and  it  is  because  this  is  true 
that  Congress  finds  it  necessary  to  undertake  a  valuation 
of  railway  property.  The  function  of  an  accountant  as 
an  historian  cannot  be  overlooked  in  a  statement  of  his 
responsibilities. 

§4.  Conclusions  of  an  Accounting  Statement.— It 
was  said  above  that  the  process  of  accounting  is  made 
up  of  a  series  of  statements  leading  to  definite  conclusions. 
It  should  next  be  noted  that,  according  to  the  usual  form 


14       AMERICAN  RAILWAY  ACCOUNTING 

of  accounting  statements,  these  conclusions  are  expressed 
as  a  balance  of  debit  and  credit  entries.  The  conception 
itself  is  very  simple,  although  the  correct  use  of  debit  and 
credit  entries  in  a  complicated  statement,  is  somewhat 
difficult.  In  dealing  with  debits  and  credits,  the  account- 
ant has  to  do  with  the  plus  or  the  minus,  the  more  or  the 
less,  the  surplus  or  the  deficit,  the  above  or  the  below  of 
an  assumed  zero,  a  conception  that  is  familiar  to  all  who 
make  use  of  mathematical  or  logical  reasoning. 

Accounting  balances  are  of  two  kinds.  They  may  be 
the  sum  of  entries  properly  classified,  all  of  which  are 
debits  or  all  of  which  are  credits,  or  they  may  be  the 
difference  between  the  totals  of  a  series  of  debit  and 
credit  entries;  but  whether  aggregations  of  congrous  en- 
tries, or  a  balance  of  entries  of  opposing  tendencies,  the 
figure  arrived  at  is  the  quantitive  measurement  of  a  force, 
of  a  condition,  or  of  a  tendency,  upon  which  the  adminis- 
trative officer  must  rely  for  framing  and  carrying  out  a 
successful  business  policy. 

There  are  as  many  balances  as  there  are  accounting 
statements,  and  as  many  accounting  statements  as  there 
are  transactions  of  sufficient  importance  to  require  defi- 
nite measurement.  Such  balances,  although  not  final 
or  fundamental,  serve  a  very  definite  purpose.  They 
are  struck  when  some  operating  officer  desires  specific 
information  upon  a  particular  condition,  or  for  the  pur- 
pose of  testing  the  results  of  experiments  in  current  opera- 
tion. Balances  of  this  class  are  of  the  utmost  importance, 
and  the  ease  w^ith  which  they  may  be  made  goes  far  to 
declare  a  satisfactory  system  of  accounts. 

These  are  not,  however,  the  fundamental  balances  to 
which  all  accounting  records  contribute.    The  fundamen- 


THE  TASK  OF  THE  RAILWAY  ACCOUNTANT    1 5 

tal  balances  are  four  in  number;  namely,  the  balance 
which  measures  the  cost  of  the  property,  the  balance 
which  measures  net  operating  revenues,  the  balance 
which  measures  the  current  surplus  or  deficit,  and  the 
balance  sheet  statement  of  accumulated  profit  or  loss. 
The  movement  in  these  balances  from  year  to  year  dis- 
closes, to  one  who  knows  railway  operations  and  railway 
accounts,  the  direction  in  which  the  property  is  moving. 
They  are  guides  for  the  judgment  of  the  investor,  and  a 
measure  for  those  who  desire  to  know  the  degree  of  pros- 
perity which  has  attended  the  operation  of  a  property.  In 
the  analysis  of  these  balances  will  be  found  a  test  of  the 
efficiency  and  accuracy  of  the  accounting  department. 
It  is  from  them  that  an  outside  auditor,  or  an  examiner 
sent  by  the  government,  will  start  his  investigation.  If 
it  is  found  that  the  compilations  and  entries  from  which 
these  balances  are  struck  are  correct  in  themselves,  as 
proven  by  checking  against  the  original  papers,  and  that 
they  conform  to  properly  dra^vn  definitions  and  classifica- 
tions, the  work  of  the  accountant  will  be  approved,  and 
the  balances  themselves  will  be  declared  worthy  of  con- 
fidence for  whatever  purpose  they  may  be  used.  If,  on 
the  other  hand,  an  analysis  of  these  balances  shows  that 
they  include  entries  not  covered  by  their  titles;  that  the 
ledgers  or  summaries  from  which  they  are  drawn  are 
confused  in  definition  or  classification;  or  that  the  field 
notes,  vouchers,  or  original  papers  are  indefinite  or  un- 
certain as  to  the  entries  which  they  carry; — the  accounting 
department  which  discloses  such  results  is  open  to  severe 
censure.  The  degree  of  confidence  which  may  be  placed 
in  the  integrity  of  the  four  balances  named  is  one  of  the 
accepted  tests  of  sound  accounting. 


16       AMERICAN  RAILWAY  ACCOUNTING 

§  5.  The  Compelling  Character  of  an  Accounting 
Rule. — It  is  claimed  that  accounting  is  a  science,  and 
however  disinclined  one  may  be  to  make  use  of  high- 
sounding  phrases,  he  is  obliged  to  conclude  that  railway 
accounting,  at  least,  comes  very  near  making  good  the 
claim.  The  fact  that  every  system  of  accounts  rests  on 
analysis  of  functions,  and  finds  expression  through  clas- 
sifications, is  not  urged  in  support  of  this  proposition. 
While  these  are  marks  of  scientific  procedure,  they  do  not 
of  themselves  constitute  science.  The  conmionly  accepted 
proof  that  a  body  of  organized  knowledge  has  attained 
the  rank  of  an  estabhshed  science,  is  the  coercive  or  com- 
pelling character  of  the  generahzations  to  which  it  gives 
rise  and  which  come  to  be  known  as  scientific  laws.  Laws 
of  life,  for  example,  compel  universal  recognition  because 
it  is  known  that  to  disregard  them  results  in  death.  This 
means  that  the  facts  of  life  have  been  analyzed  and  clas- 
sified, that  enduring  casual  relations  have  been  disclosed 
through  experiment  or  observation,  and  that,  as  a  result 
of  this  kind  of  study,  the  conditions  which  minister  to 
the  maintenance  of  health  and  the  perpetuation  of  life 
are  known.  Such  a  body  of  knowledge  constitutes  a 
science,  and  out  of  it  spring  the  rules  according  to  which 
life  must  be  maintained.  No  one  questions  the  compelling 
or  coercive  character  of  such  rules.  They  are  merely  an 
expression  of  the  inevitable  result  of  certain  lines  of  con- 
duct and,  as  rules  of  conduct,  are  self-executory. 

In  much  the  same  way  can  it  be  said  that  established 
rules  of  accounting  are  generalizations  for  the  guidance  of 
business  conduct,  a  disregard  of  which  is  a  step  in  the 
direction  of  business  disaster.  These  rules  are  items  in 
the  general  law  of  business  success.     They  compel  ob- 


THE  TASK  OF  THE  RAILWAY  ACCOUNTANT    17 

servance  because  a  business  which  ventures  to  act  con- 
trary to  their  diction  sooner  or  later  ceases  to  exist.  This 
truth  is  especially  pertinent  for  great  industries  which, 
like  railways,  have  assumed  the  corporate  form,  and 
which  are  organized  and  administered  on  the  assumption 
of  perpetual  existence.  Endurance  is  for  them  a  phase  of 
success  and,  in  order  to  continue  to  live,  the  observance 
of  the  fundamental  laws  of  business  conduct  is  essential. 
These  laws  find  their  most  concrete  expression  in  account- 
ing rules.  Two  or  three  illustrations  will  make  clear  what 
is  meant  by  the  compelling  character  of  the  generaliza- 
tions touching  business  conduct  to  which  the  science  of 
accounting  gives  expression. 

It  is  an  accepted  rule  of  accounts  (in  this  instance,  also 
an  accepted  rule  of  law)  that  dividends  should  be  paid 
out  of  current  or  past  profits.  The  only  other  source  from 
which  they  may  be  paid  is  capital,  and  the  declaration  of  a 
dividend  which  touches  capital  is  not  only  a  lie  to  the 
stockholders  but  it  results  in  the  dissipation  of  their  assets. 
It  is  an  abuse  of  the  trust  which  the  proprietors  of  the 
business  have  reposed  in  the  management  and  an  act 
which,  if  continued,  must  result  in  bankruptcy.  This 
does  not  apply  to  the  pajnnent  of  guaranteed  dividends, 
for  such  payments  are  in  the  nature  of  interest.  The 
illustration  refers  to  ordinary  or  preferred  dividends  which 
must  be  earned  to  justify  their  payment. 

Again,  the  declaration  of  a  net  revenue,  or  of  a  surplus, 
without  having  included  in  the  deductions  from  revenues 
all  forms  of  expense  incurred  in  the  production  of  such 
revenues,  is  contrary  to  an  established  rule  of  accounting. 
Such  practice  tends  to  the  dissipation  of  assets  and  leads 
inevitably  to  financial  embarrassment,  if  not  to  final  dis- 


18       AMERICAN  RAILWAY  ACCOUNTING 

aster.  An  accounting  rule  which  requires  that  adequate 
repairs,  replacements,  and  depreciation  should  be  made  a 
current  charge  against  revenues,  is  a  business  law  of  self- 
preservation. 

In  every  treatise  on  accounting  one  may  read  the  asser- 
tion that  the  statement  of  the  accountant,  which  rests  on 
the  accruals  of  earnings  and  expenses,  rather  than  the 
statement  of  the  treasurer,  which  rests  on  cash  receipts 
and  cash  pajnnents,  should  be  accepted  by  the  manage- 
ment when  framing  a  program  which  touches  the  use  of 
funds.  A  balance  m  the  bank  is  no  proof  that  a  business 
is  in  a  prosperous  condition,  or  that  this  cash  may  be 
safely  withdrawn  from  the  business  or  used  for  improve- 
ments and  extensions.  A  bank  balance  fails  to  disclose 
outstanding  liabiUties.  Many  business  disasters  are 
traceable  to  a  disregard  of  this  simple  distinction  between 
accruals  and  cash.  Railways  in  this  country,  and  indeed 
most  large  industries,  acknowledge  this  rule  to  stand  for  a 
rule  of  business  conduct  that  should  not  be  disregarded. 
Municipalities  and  states,  on  the  other  hand,  have  not 
yet  learned  this  simple  lesson,  a  fact  that  goes  far  to  ex- 
plain the  frequent  failure  of  municipal  business  under- 
takings. 

The  above  illustrations  give  an  idea  of  what  is  meant  by 
the  compelling  character  of  accounting  rules.  There  is 
nothing  captious  or  arbitrary  about  these  rules.  They 
are  not  developed  by  a  theorist  writing  on  business  con- 
ditions, nor  are  they  promulgated  on  the  authority  of  the 
accountant.  On  the  contrary,  they  are  drawn  from  the 
school  of  experience,  or  read  from  the  records  of  those  in- 
dustries that  have  survived  the  struggle  for  business 
existence. 


THE  TASK  OF  THE  RAILWAY  ACCOUNTANT    19 

The  recognition  of  the  scientific  character  of  accounting 
rules  throws  a  flood  of  hght  on  the  responsibihties  of  an 
accountant.  The  management  of  an  industry,  especially 
if  its  securities  are  quoted  on  the  stock  market,  is  under 
constant  temptation  to  sacrifice  true  prosperity  for 
apparent  success,  and  there  is  sufficient  speculation  and 
risk  in  aU  business  enterprises  to  invite  an  occasional  de- 
parture from  sound  business  rules.  It  is  one  of  the  func- 
tions of  accounts  to  resist  this  temptation,  and  this  may 
be  done  without  personal  controversy,  provided  the 
accountant  has  organized  his  system  of  operating  records 
in  complete  and  detailed  recognition  of  the  scientific 
requirements  of  enduring  business  success.  Under  such 
conditions,  there  can  be  no  margin  of  uncertainty.  Any 
question  as  to  the  form  of  a  statement  which  presents 
operating  results  is  decided  before  the  time  when  the  state- 
ment is  made.  The  interpretation  to  be  placed  upon 
figures,  also,  is  determined  by  the  instructions  and  def- 
initions covering  original  entries,  voucher  records,  and 
ledger  charges.  There  is  little  need  for  an  accountant 
to  come  into  conflict  with  officials  or  directors,  provided 
the  system  of  accounts  which  he  administers  from  day 
to  day  rests  upon  definitions  which  are  accurate,  and 
classifications  which  are  scientific.  The  compelling  char- 
acter of  the  accounting  principles  to  which  he  has  adjusted 
his  records  will  command  obedience. 

§  6.  Dual  Responsibility  of  an  American  Railway  Ac- 
countant.— In  all  countries  where  railways  exist,  their 
pubHc  or  quasi-public  character  is  fully  recognized.  In 
most  countries,  railways  are  owned  by  the  state  and  are 
administered  according  to  the  principles  of  public  rather 
than  of  private  finance.    In  this  country,  however,  the 


20      AMERICAN  RAILWAY  ACCOUNTING 

policy  of  private  or  corporate  ownership  is  maintained, 
and  the  interests  of  the  public  are  conserved  by  the  exer- 
cise of  administrative  supervision  on  the  part  of  the  gov- 
ernment. There  is  no  need  of  analyzing  this  policy,  much 
less  of  considering  its  relative  merits  or  demerits.  It  is 
enough  for  our  present  purpose  to  recognize  that  private 
ownership  under  public  control  is  an  established  poHcy, 
and  that,  as  the  result  of  more  than  forty  years'  experience, 
railway  commissions,  both  federal  and  state,  are  the 
agencies  for  the  exercise  of  this  control.  The  relation 
which  the  railway  accountant  sustains  to  the  government 
under  this  program  of  administrative  supervision,  is  worth 
mention,  as  showing  the  peculiar  responsibilities  assumed 
by  railway  accountants  in  this  country. 

This  relation  finds  its  best  expression  in  the  language 
used  by  the  Interstate  Commerce  Commission  from  1907 
to  1914,  in  its  orders  promulgating  the  various  original 
classifications  of  the  present  system  of  railway  accounts. 
It  was  the  purpose  of  these  orders  to  hold  the  chief  ac- 
countant of  each  railway  personally  responsible  for  the 
observance  of  all  accoimting  rules.  The  order  specifically 
said  that  ''each  and  every  person  directly  in  charge  of 
the  accounts  ...  is  hereby  required  to  see  to,  and  under 
the  law  is  responsible  for"  the  correct  appUcation  of  the 
accounting  rules  laid  down  in  the  classifications. 

This  means  that  a  railway  accountant  in  the  United 
States  is  under  a  dual  responsibiUty.  He  is  responsible 
to  the  corporation  for  faithful  service  and  for  carrying 
out  the  instructions  of  superior  officers  with  regard  to 
accounting  matters,  so  long  as  those  instructions  do  not 
conflict  with  rules  and  principles  laid  down  by  the  Com- 
mission; on  the  other  hand,  he  is  responsible  to  the  Com- 


THE  TASK  OF  THE  RAILWAY  ACCOUNTANT    21 

mission  for  a  strict  observance  of  the  rules  which  it  lays 
down.  In  the  old  days,  an  order  from  the  executive  officer 
or  a  general  manager  to  make  a  report  or  to  pass  a  voucher, 
was  accepted  as  final  by  the  accountant;  at  present,  the 
accountant  is  obliged  to  check  the  instructions  received 
from  his  superior  officers  in  the  corporation  against  the 
accounting  orders  he  has  received  from  the  Interstate 
Commerce  Commission,  and  to  exercise  his  personal 
judgment  as  to  the  legality  of  such  instructions.  He  sus- 
tains a  responsibility  to  the  government  as  well  as  to  the 
corporation.  This  is  a  somewhat  novel  adjustment  in 
American  procedure  and  one  that,  on  the  whole,  seems  to 
have  worked  with  a  fair  degree  of  success.  The  task  of 
an  American  railway  accountant  is  determined  in  large 
measure  by  the  dual  responsibility  under  which  he  works. 
The  orders  which  accompany  the  "Issue  of  1914"  of 
the  various  classifications  of  accounts  make  no  reference 
to  the  personal  responsibiUty  of  accounting  officers.  Why 
this  change  was  made  in  the  form  of  the  order  has  never 
been  explained,  nor  does  it  make  much  difference  in  the 
actual  situation.  Where  a  business  is  owned  by  a  corpo- 
ration but  controlled  by  the  government,  the  accountant 
cannot  evade  the  dual  responsibility  imposed  upon  him 
by  virtue  of  his  official  position.  * 


CHAPTER  II 

STRUCTURE  OF  A  SYSTEM  OF  RAILWAY 
ACCOUNTS 

The  structure  of  a  system  of  railway  accounts  should 
conform  to  the  analysis  of  the  business  to  which  it  per- 
tains, and  be  so  drawn  as  to  provide  a  set  of  records  that 
will  ensure  the  grouping  of  congruous  items.  The  first 
of  these  considerations  regards  a  system  of  accounts  as 
the  machinery  of  primary  audits;  the  second  holds  in 
mind  the  operating  and  statistical  uses  made  of  accounting 
records.  This  second  point  of  view  is  of  special  signifi- 
cance, inasmuch  as  the  grouping  of  incongruous  items  will 
produce  totals  that  have  no  meaning  for  the  operating 
officer  who  is  responsible  for  efficiency  and  economy,  or 
for  the  railway  statistician  whose  task  it  is  to  measure 
differentials,  to  trace  tendencies,  and  to  forecast  results. 
Reduced  to  its  final  terms,  accounting  is  the  science  of 
classification;  but  the  classification  which  is  to  serve  as 
the  basis  of  the  science  must  itself  be  based  on  an  intelli- 
gent analysis  of  agencies  and  functions.  It  is  the  purpose 
of  this  chapter  to  outline  such  an  analysis,  and  to  select 
those  considerations  that  give  character  and  form  to  the 
estabUshed  system  of  American  railway  accounts. 

§  7.  Agencies  of  Transportation. — The  agencies  of 
transportation  with  which  a  railway  accountant  is  called 
upon  to  deal  may  be  readily  listed.  These  primary  agen- 
cies are: 

22 


STRUCTURE  OF  SYSTEM  OF  RY.  ACCOUNTS    23 

Steam  Railways, 
Electric  Railways, 
Carriers  by  Water, 
Pipe  Lines, 
The  Postal  Service, 
Express  Companies, 
Sleeping  Car  Companies, 
Private  Car  Lines, 
Telegraphs,  and 
Telephones. 

All  these  agencies  are  covered  by  those  federal  enact- 
ments which  have  for  their  purpose  the  exercise  of  govern- 
ment control  over  transportation.  They  all  stand  for 
property  used  in  transporting  goods,  passengers,  or  in- 
telligence. They  fall  with  the  meaning  of  the  phrases 
'^ common  carriers,"  ''railways,"  or  ''instrumentalities 
of  transportation,"  as  those  phrases  have  been  legally 
interpreted. 

This  idea  of  a  comprehensive  system  of  national  trans- 
portation is  a  matter  of  growth.  The  law  of  1887,  by 
which  the  Interstate  Commerce  Commission  was  created, 
as  this  law  was  interpreted  and  administered,  assumed, 
federal  jurisdiction  over  interstate  steam  and  electric 
railways,  and  water  lines  if  operated  in  connection  with 
such  railways.  The  rewriting  of  this  law  in  1906  extended 
the  meaning  of  the  term  "common  carrier"  to  include 
express  companies  and  sleeping  car  companies.  By  the 
same  revision  of  the  law,  the  term  "transportation"  was 
extended  to  include  private  car  lines  irrespective  of  owner- 
ship, and  of  any  contract  covering  their  use.  Telegraphs 
and  telephones  were  formally  recognized  as  a  part  of  the 
public  transportation  system  of  the  country  in  1910,  when 
they  were  declared  by  statute  to  be  common  carriers. 


24       AMERICAN  RAILWAY  ACCOUNTING 

The  postal  service  is  a  government  monopoly  and  is  ad-* 
ministered  directly  by  government  officials,  but  it  cannot 
on  that  account  be  excluded  from  the  list  of  transporta- 
tion agencies. 

Many  agencies  are  included  in  the  transportation  sys- 
tem, besides  those  named  in  the  above  list.  Thus,  the 
term  "railroad"  is  defined  to  include  bridges  and  ferries 
used  in  connection  with  a  railroad;  also  switches,  spurs, 
tracks,  and  terminal  facilities;  as  well  as  freight  depots, 
yards,  and  grounds  used  or  necessary  for  transportation. 
Ice  plants,  ventilation  and  refrigeration  plants,  storage 
and  transfer  facilities,  and  the  like,  are  ''instrumentali- 
ties ...  for  the  handling  of  property  transported."  All 
this  makes  evident  the  comprehensive  character  of  busi- 
ness transactions  to  be  covered  by  a  system  of  transporta- 
tion accounts. 

It  would,  of  course,  be  possible  to  provide  an  independ- 
ent set  of  accounts  for  each  of  the  transportation  agencies 
listed  above;  but  such  is  their  interdependence,  when 
joined  for  the  production  and  sale  of  a  continuous  flow  of 
transportation,  that  the  result  would  be  far  from  satis- 
factory. It  was  doubtless  the  recognition  of  this  fact 
that  led  Congress  to  embrace  all  agencies,  ''faciHties," 
and  "instrumentaUties"  of  transportation  in  its  provision 
for  a  system  of  transportation  records.  This  treatise  is 
confined  primarily  to  railway  accounting,  but  in  order 
to  understand  railway  accounts,  they  must  be  regarded 
as  a  part  of  a  general  scheme.  It  is  essential  that  the 
structure  of  railway  accounts  should  be  so  drawn  as  to 
intermesh  with  the  accounting  structure  of  other  agencies 
of  transportation  wherever  there  is,  or  may  be,  contractual, 
financial,  or  operating  contracts. 


STRUCTURE  OF  SYSTEM  OF  RY.  ACCOUNTS  25 

As  a  matter  of  information,  it  may  be  said  in  passing 
that,  in  the  formulation  of  a  standardized  system  of 
records  for  transportation  agencies  in  the  United  States, 
the  requirements  of  railway  accounting,  strictly  defined, 
were  first  considered,  and  the  accounting  structure  thus 
devised  was  modified  to  meet  the  pecuhar  requirements 
of  other  agencies.  In  quite  a  number  of  instances  it  was 
found  necessary  to  revise  the  original  draft  devised  for 
railways  in  order  to  provide  for  some  essential  character- 
istic of  a  minor  agency.  In  this  manner,  an  harmonious 
framework  of  a  general  system  of  transportation  account- 
ing was  worked  out.  A  railway  accountant  ought  to  be 
familiar  with  all  phases  of  transportation  accounting  in 
order  to  be  a  good  railway  accountant. 

§  8.  The  Accountant's  Definition  of  a  Steam  Railway. 
— Every  department  of  that  complex  organization  known 
as  an  operating  steam  railway  acts  upon  its  own  peculiar 
conception  of  what  constitutes  a  railway.  Each  depart- 
ment, or  bureau  of  a  department,  lays  stress  on  those  func- 
tions for  which  it  assumes  responsibility.  The  accountant, 
however,  is  an  exception  to  this  generalization.  By  virtue 
of  the  peculiar  responsibiUties  of  his  oflfice,  he  is  forced  to 
accept  a  sufficiently  broad  definition  of  a  railway  to  cover 
all  classes  of  property,  all  functional  organizations  of  prop- 
erty, all  instrumentalities  of  transportation,  and  all  agree- 
ments, contracts,  or  financial  interests  which  possess  an 
adequate  degree  of  independence  to  warrant  a  separate 
record  and  a  personal  history.  For  him  a  railway  is  made 
up  of  a  large  number  of  interdependent  accounting  units. 

The  best  expression  of  a  railway  accountant's  concep- 
tion of  a  railway  is  found  in  the  index  to  his  general  ledger, 
provided,  of  course,  this  ledger  is  in  fact  a  general  ledger. 


26       AMERICAN  RAILWAY  ACCOUNTING 

It  is  rather  the  idea  of  a  ledger  than  the  ledger  of  current 
practice  that  justifies  this  statement.  It  may  be  more 
convenient  as  an  office  adjustment  to  carry  several  ledgers, 
but  somewhere  or  somehow  their  balances  must  be  as- 
sembled. Where  sub-ledgers  are  opened  to  csiny  the 
details  of  special  groups  of  items,  such  sub-ledgers  are, 
strictly  speaking,  a  part  of  the  general  ledger. 

The  accounting  units  recognized  by  the  ledger  index,  if 
defined  in  this  comprehensive  way,  may  be  roughly  clas- 
sified as  units  of  property,  units  that  stand  for  operating 
agreements,  and  units  based  on  contracts.  Each  of  these 
may  properly  claim  cursory  consideration. 

Property.  For  a  complete  classification  of  property  used 
for  railway  purposes,  one  must  rely  on  the  analysis  of 
the  construction  engineer,  and  this  analysis  is  recognized 
as  final  and  controlHng  in  the  formulation  of  certain  of  the 
accounting  classifications.  But  the  accountant  cannot 
safely  arrest  his  analysis  with  the  orderly  listing  of  prop- 
erty. He  is  obliged  to  go'  beyond  the  property  register 
to  consider  the  business  purpose  for  which  these  various 
units  of  property  were  constructed,  and  to  group  them 
in  such  a  manner  as  to  disclose  the  specialized  services  of 
each. 

Under  the  conventional  term  ''railway,"  the  accountant 
sees  main  line,  branch  fine  and  feeder ;  side  track  for  pass- 
ing, side  track  for  storage,  and  track  to  car  sheds,  round 
house  and  shop;  he  sees  yard  tracks,  stock  pens,  elevators, 
and — ^what  is  now  coming  to  be  of  pecuHar  significance — 
terminals;  he  regards  bridges,  lighters,  car  ferries,  and  the 
like,  not  alone  as  property,  but  as  operating  disabiUties; 
he  sees  also  industrial  lines,  switching  lines,  belt  lines, 
each  with  its  own  peculiar  business  character;  in  short,  he 


STRUCTURE  OF  SYSTEM  OF  RY.  ACCOUNTS    27 

looks  at  property  of  all  kinds  and  all  sorts  in  its  relation 
to  the  production  of  a  final  net  surplus,  and  consequently 
groups  it  in  his  records  according  to  the  relation  it  bears 
to  this  result.  It  is  the  peculiar  service  rendered  by  dif- 
ferent kinds  of  property  that  gives  character  to  the  ac- 
countant's definition  of  a  railway,  so  far  as  that  definition 
has  to  do  with  physical  elements. 

Operating  Agreements.  The  organization  of  a  property 
for  operation  demands  of  the  accountant  an  extended  list 
of  speciaUzed  records. 

A  large  property,  in  order  to  reaHze  economy  and  effi- 
ciency, must  be  divided  into  a  number  of  functional  or 
divisional  units,  each  of  which  presents  peculiar  problems 
and  calls  for  separate  records.  Many  agencies,  also, 
must  be  used  which  are  not  included  in  railway  property, 
and  for  each  of  which  an  open  account  must  be  main- 
tained. But  of  especial  importance  is  the  fact,  that 
economy  of  operation  requires  that  certain  classes  of 
railway  property  should  be  used  jointly  by  two  or  more 
railways,  such  as  joint  yards,  joint  tracks,  joint  terminals, 
and  the  like,  each  of  which  in  its  effect  on  accoimts  become 
a  separate  transportation  agency  for  which  specialized 
records  are  required.  In  both  revenue  and  expense 
accounts,  the  proper  treatment  of  joint  faciUty  records 
has  come  to  be  an  important  accounting  problem.  The 
development  of  through  traffic  also  calls  for  a  specialized 
system  of  audits  designed  to  secure  a  proper  distribution 
of  jointly  earned  revenues,  and  has  resulted  in  an  inter- 
change of  cars  so  extensive  and  so  difficult  to  control  that 
car  accounting  has  come  to  be  a  specialized  branch  of 
railway  accounting.  Joint  traffic  is  also  responsible  for 
interline  freight-claim  accoimting,  which  has  grown  to 


28       AMERICAN  RAILWAY  ACCOUNTING 

such  dimensions  as  to  take  its  place  as  an  independent 
bureau  of  the  accounting  department. 

The  truth  is  that  the  railway  system  of  the  United 
States  has  come  to  be  a  unified,  standardized  system,  so 
far  as  the  technique  of  construction  and  operation  is 
concerned,  a  result  which  could  not  have  been  accom- 
plished except  by  the  specialization  of  accounting  records 
and  the  formulation  of  uniform  rules,  wherever  independ- 
ently owned  properties  come  into  contact  for  the  purpose 
of  co-operative  operation.  It  is  this  situation  which  gives 
to  American  railway  accounting  a  significance  of  its  own. 

Contractual  Unity.  The  accountant's  definition  of  a 
railway  unit  recognizes,  also,  the  contractual  unity  of  a 
large  number  of  independently  owned  properties.  The 
Statistical  Division  of  the  Interstate  Commerce  Commis- 
sion carries  on  its  mailing  list  the  names  of  more  than  two 
thousand  railway  corporations  that  maintain,  for  one 
reason  or  another,  an  independent  legal  existence.  Of 
this  number,  something  over  eight  hundred  are  "independ- 
ent operating  roads."  The  number  of  railways  that  re- 
ceive a  gross  revenue  of  one  milHon  dollars  and  above  are 
one  hundred  and  eighty-three,  which  Unes  cover  eighty- 
nine  per  cent  of  the  operating  mileage  of  the  country  and 
ninety-seven  per  cent  of  the  operating  revenues.  If  these 
so-called  independent  railways  were  grouped  by  systems, 
the  impression  of  a  centralized  financial  interest,  as  well 
as  of  operating  control,  would  be  emphasized.  This  cen- 
traUzation  is  attained  by  contractual  organization,  but 
each  contract  comes  to  be  for  the  accountant  a  distinct 
legal  entity  whose  interests  must  be  separately  measured 
and  truthfully  recorded. 

From  the  above  cursory  statement,  it  is  apparent  that 


STRUCTURE  OF  SYSTEM  OF  RY.  ACCOUNTS    29 

the  accountant's  definition  of  a  ''steam  railway"  does  not 
express  a  simple  conception.  It  covers  many  classes  of 
property,  many  kinds  of  interline  agreements  and  many 
sorts  of  inter-company  contracts.  The  accountant  does 
not  control  conmiercial  and  business  conditions.  He  must 
take  them  as  they  are,  and  devise  for  them  a  system  of 
records  which,  while  comprehensive  and  accurate  as  to  de- 
tails, will  not  only  meet  the  needs  of  the  various  classes 
of  operating  officers,  but  at  the  same  time  work  into  a 
few  generalizations  and  simple  statements  that  may  be 
accepted  as  measuring  the  degree  of  success  attained  by 
the  business,  and  as  showing  the  probable  trend  of  the 
business  for  the  future.    His  task  is  no  light  task. 

§  9.  Analysis  of  Railway  Functions. — The  selection 
of  a  satisfactory  framework  for  railway  records  and  ac- 
counts calls  for  the  analysis  and  correlation  of  railway 
functions.  Not  all  of  the  functions  disclosed  demand 
special  accounting  recognition,  but  all  without  exception 
fall  within  the  survey  of  the  accountant  and  touch,  either 
directly  or  indirectly,  his  responsibilities.  The  analysis 
here  submitted  may  not  be  satisfactory  when  considered 
from  all  points  of  view,  but  it  does  serve  to  indicate  those 
general  groupings  of  transactions  which  determine  the 
accounting  structure.  It  follows  the  normal  growth  of 
the  business  and,  in  order  that  the  discussion  may  not  be 
unduly  extended,  it  is  submitted  as  an  outUne  with  cursory 
comment. 

OUTLINE   OF  TRANSACTIONS 

Construction.  Construction,  as  here  used,  stands  for 
the  building  of  the  physical  property.  Expenditures 
for  construction  are  the  ''cost  of  property"  ready  for 


30       AMERICAN  RAILWAY  ACCOUNTING 

operation,  exclusive  of  so-called  ^'development  costs." 
It  covers  the  three  following  functions: 

1.  Economic  Engineering,  which  covers  the  prelim- 
inary commercial  survey,  the  study  of  traffic  con- 
ditions, the  localization  of  material  for  construction 
and  operation,  the  character  and  cost  of  labor,  and 
all  other  information  necessary  to  enable  an  in- 
vestor to  determine  whether  or  not  a  proposed 
investment  of  capital  is  safe  and  wise. 

2.  Construction  Engineering,  which  covers  the  invest- 
ment of  money  with  a  definite  physical  form.  It 
covers  ''original  construction,'^  and  construction 
technically  known  as  extensions,  improvement, 
additions  and  betterments. 

3.  Financial  Engineering,  which  assumes  the  task 
of  furnishing  the  money  required  for  construction 
work  in  adequate  amounts  and  at  the  time  when 
the  money  is  needed;  of  determining  the  kind  of 
liabiUties  to  be  assumed  by  the  enterprise  as  a 
means  of  obtaining  the  necessary  funds;  and  of 
deciding  on  the  corporate  form  to  be  assumed  by 
the  property.  System  building,  also,  is  a  financial 
function. 

Organization.  Organization  is  never  an  accomplished 
fact.  Constant  change  in  the  conditions  under  which 
railway  property  is  administered  demands  a  corre- 
sponding change  in  the  form  of  operating  and  of  ad- 
ministrative supervision.  Frequent  readjustments 
are  necessary  to  guard  against  disintegration  of  con- 
trol and  to  ensure  the  operation  of  the  property  at 
its  highest  economic  efficiency.  For  these  reasons, 
organization,    like    construction    and    operation,    is 


STRUCTURE  OF  SYSTEM  OF  RY.  ACCOUNTS    31 

treated  as  a  railway  fuDction.  It  covers  the  following 
lines  of  adjustment,  each  of  which  shapes,  to  some 
extent,  a  system  of  railway  accounts. 

1.  Organization  for  Control.  This  phase  of  organiza- 
tion contemplates  a  clear  demarkation  of  author- 
ity and  a  definite  localization  of  responsibility.  It 
discloses  to  the  accountant  the  source  of  the  au- 
thority upon  which  he  must  rely  for  all  primary 
audits  and  accounting  records.  Indeed,  the  organ- 
ization of  the  Division  of  Accounts  is  determined 
by  the  general  organization  of  the  property  for 
the  purpose  of  control.  The  distribution  of  items 
in  the  accounts  follows  in  large  measure  the  operat- 
ing organization  of  the  property. 

2.  Organization  of  Inter-departmental  Relations.  These 
relations  may  be  either  administrative  or  operating; 
they  may  reflect  either  the  '^ divisional"  or  the 
"functional"  theory  of  control.  They  are  of  im- 
portance in  shaping  a  system  of  accounts  because 
they  determine,  in  large  measure,  the  form  and 
contents  of  statistical  statements  designed  to  secure 
efl[iciency  and  economy. 

3.  Organization  of  Inter-operating  Relations.  Under 
this  head  are  included  that  large  number  of  con- 
tracts or  agreements  by  which  the  property  of 
different  companies  or  agencies  are  brought  under 
an  orderly,  continuous,  and  standardized  control. 
While  they  do  not  affect  in  any  marked  degree 
the  broad  structure  of  accounting  classifications, 
they  do,  because  of  the  relative  equities  involved, 
submit  to  the  accountant  some  of  the  most  diflScult 
problems  with  which  he  has  to  deal.   The  structure 


32       AMERICAN  RAILWAY  ACCOUNTING 

of  an  accounting  system  must  be  adjusted  to  the 
requirements  of  the  contracts  and  agreements 
that  underlie  this  phase  of  organization. 

4.  Organization  for  Standardized  Practice.  Reference 
was  made  above  to  the  fact  that  American  rail- 
ways have  come  to  be  an  operating  unit  notwith- 
standing the  fact  that  they  are  owned  by  private 
companies.  The  bearing  of  this  phase  of  organiza- 
tion upon  the  structure  of  railway  accounts,  is  to 
place  emphasis  on  the  necessity  of  a  uniform  treat- 
ment of  inter-line  audits  and  records,  and  a  uni- 
form practice  in  rendering  and  accepting  inter- 
line and  inter-company  bills.  The  structure  of  an 
accounting  system  for  every  railway  should  be  so 
drawn  that  its  balances,  combined  with  corre- 
sponding balances  of  other  roads,  will  produce 
correct  totals  for  all  roads. 

5.  Organization  affected  by  Government  Supervision. 
As  already  explained,  the  railway  accountant  is  re- 
sponsible for  the  observance  of  accounting  orders 
promulgated  on  government  authority.  Every  ad- 
ministrative ruling  of  the  government,  and  every 
law  touching  railway  practice,  must  be  known  by 
the  accountant,  and  the  structure  of  his  accounts 
must  be  adjusted  accordingly.  The  point  is  that 
the  government,  so  far  as  it  may  see  fit  to  exercise 
the  function  of  administrative  supervision,  must 
be  recognized  as  a  source  of  positive  authority, 
and  no  accounting  structure  will  be  satisfactory 
that  is  not  adjusted  to  this  situation. 

Operation.  In  its  comprehensive  sense,  railway  opera- 
tion covers  the  maintenance  of  the  property,  the 


STRUCTURE  OF  SYSTEM  OF  RY.  ACCOUNTS    33 

sale  of  transportation,  the  service  of  transporta- 
tion, and  those  functions  of  general  supervision  and 
management  which  make  the  transportation  ma- 
chine work  smoothly  in  all  its  parts.  The  credit 
transactions  that  spring  from  railway  operation  give 
rise  to  what  is  known  as  Revenue  accounting.  The 
classification  of  revenues  and  the  rules  laid  down  for 
the  audit  and  the  entry  of  revenue  constitute  a  dis- 
tinct, semi-independent  branch  of  railway  records. 
The  same  may  be  said  of  debit  transactions  arising 
out  of  operation.  This  gives  rise  to  Expense  account- 
ing; that  is  to  say,  to  the  classification  of  and  rules 
for  recording  operating  expenses. 

Under  operation,  also,  are  included  the  manage- 
ment of  properties  whose  capital  is  covered  in  the 
general  balance  sheet,  but  whose  services  are  con- 
nected with  the  business  of  transportation  in  an  in- 
direct manner  only.  The  manufacture  of  ice  for 
refrigeration,  and  the  operation  of  dining  cars,  are 
illustrations  of  such  operations.  The  records  of 
operations  of  this  class  must  be  kept  separate  from 
those  of  transportation  proper, — or  at  least  they 
should  be  kept  in  such  a  manner  that  no  confusion 
may  arise  as  to  the  various  sources  of  revenues  or 
occasions  for  payments. 

Railway  operations,  however,  exclude  a  business 
entirely  foreign  to  transportation,  notwithstanding 
the  fact  that  the  capital  with  which  such  a  business 
is  carried  on  is  furnished  by  a  railway  corporation. 
In  case  a  railway  owns  and  operates  timber  property, 
or  coal  fields,  the  management  of  these  properties 
should  be  regarded  as  entirely  outside  the  legitimate 


34       AMERICAN  RAILWAY  ACCOUNTING 

business  of  transportation,  and  the  accounts  should 
reflect  the  separation.  A  system  of  railway  accounts 
should  be  confined  to  the  service  of  transportation. 

Further  analysis  of  the  operating  functions  of  a 
railway  would  encroach  upon  the  special  discussion 
of  revenues  and  expenses  which  will  claim  subsequent 
attention.  From  what  has  been  said,  it  must  be 
evident  that  the  larger  number  of  railway  transac- 
tions to  be  recorded  center  in  operation  and,  con- 
sequently, that  the  requirements  of  operation  exert 
a  very  considerable  influence  on  the  structure  of  a 
system  of  railway  accounts. 
Corporation  Transactions.  Every  business  carried 
on  for  profit  is  clothed  by  the  accountant  with  a 
distinct  personality.  This  he  does  in  order  to  meas- 
ure the  periodic  gain  or  loss  resulting  from  the  activi- 
ties of  a  property,  or  to  ascertain  its  financial  stand- 
ing. In  the  case  of  a  railw^ay  this  may  be  readily 
done,  for  most  railways  are  incorporated  and,  on 
this  account,  are  able  to  express  their  business  unity 
through  the  legal  personaHty  which  incorporation 
creates.  It  is  the  corporation  that  borrows  money 
and  assumes  the  Hability  of  accruing  interest.  It  is 
the  corporation  that  invests  money  in  foreign  enter- 
prises and  is  the  recipient  of  the  accruing  benefit 
in  the  form  of  dividends,  interest,  or  profit.  It  is  the 
corporation  that  acts  as  trustee  for  funds  belonging 
to  its  employees,  and  by  contract  becomes  a  con- 
tributor to  such  funds.  It  is  the  corporation  as  an 
individualized  unit  that  enters  into  a  quasi-agreement 
between  itself  as  a  person  and  the  business  which  it 
represents.    The  adoption  of  a  rule  that  the  amortiza- 


STRUCTURE  OF  SYSTEM  OF  RY.  ACCOUNTS    35 

tion  of  discounts  on  outstanding  bonds  shall  be  spread 
over  the  life  of  the  bond,  may  be  cited  in  illustration 
of  such  a  quasi-agreement. 

The  point  here  emphasized  is  that  the  business 
functions  of  a  property,  those  functions  that  bear 
the  imprint  of  contractual  personality  and  financial 
responsibility,  are  essentially  different  from  the 
operating  functions  that  arise  on  account  of  the 
industrial  use  of  the  physical  property.  This  dis- 
tinction is  most  significant,  for  it  draws  the  line 
between  the  revenue  accounts  and  the  income  ac- 
count. 
Functions  of  Ownership.  Back  of  the  corporation, 
which  as  a  legal  personality  holds  the  title  to  the 
property,  stands  the  stockholder  who  is  the  actual 
owner,  and  the  bondholder  who  is  the  contingent 
owner,  of  the  property.  The  analysis  of  functions 
that  pertain  to  an  active  railway  cannot  be  closed 
without  reference  to  those  transactions  by  which 
the  owner's  interest  is  expressed.  Is  there  a  deficit, — 
how  is  the  deficit  to  be  met?  Is  there  a  surplus, — 
for  what  is  the  surplus  to  be  appropriated?  Ques- 
tions hke  these  and  many  others  touching  general 
policy,  future  development,  the  balancing  of  present 
and  future  interest,  are  ever  present  and  demand 
continuous  answer.  Transactions  resulting  from 
instructions  relative  to  general  policy  center  in  what 
the  economist  calls  the  entreprenneur's  interest,  but 
which  more  simply  expressed,  is  the  interest  of  the 
owner.  All  transactions  of  this  sort  reflect  the  de- 
cisions of  the  management,  and  the  accounting 
structure  should  be  such  as  to  enable  them  to  be 


36       AMERICAN  RAILWAY  ACCOUNTING 

easily  traced  and  their  results  accurate!}^  measured. 
The  influence  of  the  owner  may  be  seen  through  the 
entire  accounting  system,  but  it  is  especially  appar- 
ent in  the   appropriation  records  and  the  general 
balance  sheet. 
§  10.  The  Classification.— Notwithstanding  the  some- 
what extended  list  of  transportation  agencies,  the  diver- 
sity of  definitions  descriptive  of  steam  railways,  and  the 
broad  field  covered  by  the  analysis  of  railway  functions, 
the  general  structure  of  railway  accounts  is  compara- 
tively simple.    It  is  a  triumph  in  the  art  of  analysis  that 
the   complicated   transactions   of  railway   construction, 
railway    operation,    railway    financiering,    and    railway 
policy-making,  can  be  satisfied  by  so  simple  a  structure 
as  that  which  underlies  the  standardized  system  of  ac- 
■    counts  used  by  American  railways.     The  classifications 
which   comprise  this  system,  and  which  were  promul- 
gated by  the  Interstate  Commerce  Conmiission  for  the 
use  of  inter-state  railways,  are  given  below.    The  titles, 
and  the  order  of  presentation  are  slightly  different  from 
the  Issues  of  1914  appended  to  this  treatise. 
I.  Classification  of  Expenditures  for  Road  and  Equipment. 
This  classification  covers  the  cost  of  the  property 
as  shown  by  the  records  of  the  construction  engineer. 
It  covers  the  original  cost  and  the  cost  of  extensions, 
additions  and  betterments  to  the  property  subse- 
quent to  the  date  when  it  is  taken  over  for  the  pur- 
pose of  operation.    The  balance  shown  by  construc- 
tion records  is  the  first  figure  that  appears  on  the 
assets  side  of  the  general  balance  sheet.    The  de- 
tailed discussion  of  construction  accounting  will  be 
"^      found  in  Chapters  III  and  IV  of  this  treatise. 


STRUCTURE  OF  SYSTEM  OF  RY.  ACCOUNTS    37 

II.  Classification  of  Operating  Expenses.  What  is  tech- 

nically known  as  operating  expenses  is  confined 
to  the  direct  cost  of  rendering  the  service  of  trans- 
portation, but  the  expenses  incident  to  ancillary 
operations  must  be  added  before  arriving  at  a  total 
for  the  purpose  of  disclosing  the  net  revenues  of 
operation.  A  discussion  of  this  class  of  debit  transac- 
tions is  found  in  Chapter  V. 

III.  Classification  of  Operating  Revenues.  This  classifica- 
tion covers  the  credit  side  of  transportation  services. 
It  covers,  also,  or  rather  there  is  combined  wdth  it 
before  arriving  at  the  gross  of  operating  revenues, 
such  revenues  as  accrue  from  operations  ancillary  to 
transportation  by  rail  but  which  are  not,  strictly 
speaking,  transportation  services.  The  balance 
which  results  from  deducting  operating  expenses 
from  operating  revenues  stands  for  the  current 
operating  profit.  It  is  the  net  operating  revenue. 
The  consideration  of  this  phase  of  accounting  will  be 
found  in  Chapter  VI. 

IV.  Classification  of  Income  Accounts.  From  the  net 
revenue  from  operations  are  deducted  taxes.  The 
remainder  stands  for  the  operating  income  of  the 
corporation.  To  this  are  added  the  contractual  in- 
come which  accrues  from  investments,  and  the  sum 
is  the  gross  corporate  income.  Against  this  amount 
is  charged  contractual  payments,  such  as  interest, 
rent,  and  the  like,  and  the  remainder  is  the  surplus 
at  the  disposal  of  the  corporation.  It  may  be  paid 
out  in  dividends,  it  may  be  returned  to  the  property, 
or  it  may  be  carried  as  a  free  accumulated  surplus. 
The  debit  and  credit  entries  thus  outlined  make  up 


38       AMERICAN  RAILWAY  ACCOUNTING 

the  income  account.  It  is  a  separate  statement  and 
complete  in  itself,  for  the  reason  that  it  reflects  the  cor- 
poration's contractual  interests.  The  resulting  bal- 
ance gives  the  annual  corporate  surplus.  A  discussion 
of  the  income  account  will  be  found  in  Chapter  VII. 

V.  The  Profit  and  Loss  and  Appropriation  Accounts.  In 

order  that  the  accountant's  records  may  reflect  a  true 
history  of  the  life  of  the  property,  it  is  necessary  that 
the  transactions  of  a  current  year  should  be  incor- 
porated with  the  accumulated  results  of  past  transac- 
tions. This  is  the  peculiar  function  of  the  profit  and 
loss  account,  of  which  the  appropriation  accounts 
may  perhaps  be  regarded  as  a  part.  These  accounts 
also  disclose  the  operating  and  financial  policy  of 
the  management,  and  for  that  reason,  if  for  no  other, 
should  be  regarded  as  an  independent  group  of  com- 
prehensive accounting  entries.  These  topics  form 
the  basis  of  discussion  in  Chapter  VIII. 

VI.  The  General  Balance  Sheet.  The  general  balance 
sheet  is  the  center  of  the  accounting  system.  Its 
purpose  is  to  disclose  the  financial  standing  of  the 
property  on  the  date  on  which  the  balance  is  struck. 
It  submits  a  comparison  of  assets  and  liabilities, 
properly  classified,  and  the  final  balance  which  the 
comparison  shows,  is  the  measure  of  the  accumulated 
surplus  or  accumulated  deficit  resulting  from  the 
operation  of  the  property  during  its  operating  exist- 
ence. This  surplus  is  subject  to  an  analysis  which 
discloses,  in  some  degree  at  least,  the  character  of 
the  assets  which  the  surplus  represents.  Its  function, 
also,  is  distinct.  The  balance  sheet  is  considered  in 
detail  in  Chapter  IX. 


CHAPTER  III 
CONSTRUCTION  COSTS  PRIOR  TO  OPERATION 

From  the  construction  accounts  of  a  railway,  one  should 
be  able  to  read  the  cost  of  its  physical  property.  For  the 
most  part,  these  accounts  cover  items  of  expenditure  for 
material  and  labor  used  in  the  building  of  a  railway  plant, 
and  the  amounts  spent  in  the  purchase  or  building  of 
equipment;  but  they  also  provide  for  the  recording  of 
4  incidental  receipts  that  accrue,  or  credits  that  are  made, 
while  the  property  is  under  construction.  The  balance 
of  these  debit  and  credit  entries  should  give  the  true  cost 
of  the  physical  property  to  the  investor. 

Railway  construction  accounts  are  commonly  confined 
to  the  building  of  the  physical  property;  they  have  nothing 
to  do  with  the  building  of  a  business  through  the  use  of 
such  property.  What  is  sometimes  called  the  ''develop- 
mental cost"  is  a  different  thing  in  itself  from  con- 
struction cost,  and  involves  a  different  class  of  ex- 
penditures. It  may  be  that,  for  certain  purposes,  these 
two  classes  of  expenditures  should  be  brought  together, 
but  that  does  not  mean  that  they  belong  to  the  same 
accounting  classification.  The  construction  accounts 
used  by  American  railways  are  properly  confined  to  the 
building  of  the  physical  plant. 

The  balance  of  construction  accounts,  if  struck  at  the 
time  the  property  is  transferred  from  the  contractor  or 
construction  engineer  to  the  operating  department  of 
the  railway,  stands  for  the  original  cost  of  the  property; 


40       AMERICAN  RAILWAY  ACCOUNTING 

if  the  balance  be  struck  at  a  date  later  than  the  date  of 
transfer,  it  stands  for  original  cost  as  affected  by  sub- 
sequent transactions.  It  has  httle  or  nothing  in  common 
with  present  reproduction  value  (that  "fog  zone"  of 
commissions  and  of  courts);  it  may  differ  widely  from 
inventories  which  are  influenced  by  changes  in  prices  sub- 
sequent to  the  close  of  original  construction;  it  may  even 
lose  in  large  measure  its  accounting  identity  as  the  result 
of  expenditures  for  additions  and  betterments  designed 
to  realize  the  advantages  of  new  inventions.  But,  not- 
withstanding all  this,  the  figure  is  significant,  and  its 
content  must  be  fully  appreciated  by  one  who  desires  to 
understand  the  first  item  which  appears  on  the  assets 
side  of  the  general  balance  sheet;  namely,  "Investment 
in  Road  and  Equipment."  It  is  the  peculiar  service  of 
the  classification  of  construction  accounts  to  define  in 
detail  original  cost. 

§  11.  Close  of  Original  Construction  Records. — Ex- 
penditures chargeable  to  the  property  account  are  either 
original  expenditures  or  expenditures  subsequent  to  the 
transfer  of  the  property  to  open  line  work.  The  present 
chapter  deals  with  original  expenditures.  It  is  sometimes 
difficult  to  determine  correctly  the  date  of  transfer.  Any 
uncertainty  on  this  point  may  involve  serious  consequences 
for  those  who  are  interested  in  construction  contracts  or 
who  assume  operating  responsibilities.  Indeed,  the 
amount  chargeable  to  capital  is  itself  affected  by  the  date 
assigned  for  the  close  of  the  construction  period. 

Interest  during  construction,  for  example,  is  a  construc- 
tion charge,  but  an  undue  or  unreasonable  extension  of 
the  construction  period  would  overburden  the  cost  of 
property  by  unwarranted  interest  charges.     The  same 


CONSTRUCTION  COSTS  PRIOR  TO  OPERATION  41 

may  be  said  of  the  salaries  of  construction  engineers, 
amortization  charges  (should  such  charges  be  allowed),  or 
the  maintenance  of  machinery  used  during  construction. 

Several  rules  have  been  set  up  for  the  determination 
of  this  date,  but  the  most  acceptable  rule  is  the  one  which 
selects  the  transfer  of  the  interest  charge  from  capital  to 
revenue  as  proof  of  the  transfer  of  the  property  from 
construction  to  operation.  Not  only  is  this  rule  definite 
and  exact,  but  the  conditions  which  justify  a  charge  of 
interest  to  capital  are  so  clear,  as  to  render  a  continuation 
of  that  charge  beyond  the  construction  period  a  flagrant 
disregard  of  accounting  principles.  Some  degree  of  opera- 
tion may  be  carried  on  during  construction,  and  certain 
kinds  of  construction  work  may  be  done  by  the  operating 
department,  but  the  conditions  which  warrant  such  a 
procedure  are  not  of  the  sort  which  render  uncertain  the 
proper  treatment  of  interest  charges. 

§  12.  Analysis  of  the  Classification. — The  standard- 
ized classification  of  construction  expenditures  provides 
for  three  general  and  sixty-two  primary  accounts.  The 
general  accounts  are  designated  £is: — 

Road, 

Equipment,  and 
General  Expenditures. 

Under  the  caption  Road  are  included  forty-seven  pri- 
mary accounts  which  cover  the  purchase  of  the  right  of 
way,  the  preparation  of  the  right  of  way  for  the  track,  the 
track  itself,  and  all  appurtenences  attached  to  the  right 
of  way  to  make  it  ready  for  the  movement  of  trains.  It 
also  includes  all  buildings  and  structures  required  for 
the  production  and  sale  of  transportation,  as  well  as  road 


42       AMERICAN  RAILWAY  ACCOUNTING 

machinery  and  tools  to  be  used  in  the  maintenance  of  the 
property  when  taken  over  for  operation.  A  reading  of 
the  titles  of  the  primary  accounts  under  this  general  head- 
ing will  give  a  concrete  idea  of  what  is  meant  by  the  word 
Road. 

Under  the  general  account  Equipment  are  included  the 
cost  of  locomotives,  of  all  sorts  of  cars,  motor  equip- 
ment, work  equipment,  floating  equipment  or  ferries,  tugs, 
floats,  and  the  like,  used  in  railway  transportation,  and 
of  all  other  kinds  of  property  classed  as  equipment  rather 
than  as  road.  In  this  classification  road  and  equipment 
together  cover  all  items  of  physical  property  designed 
for  use  in  what  is  known  as  the  railway  service. 

General  Expenses  are  those  which  must  be  incurred 
for  the  construction  of  a  railway,  but  which  are  common 
to  both  Road  and  Equipment  such  as  organization  ex- 
penses, general  oflBce  expenses,  legal  expenses,  taxes,  and 
interest  during  construction.  The  exceptions  to  this  state- 
ment are  neither  numerous  nor  important. 

The  selection  of  titles  for  the  primary  accounts  is  not 
so  simple  a  matter.  For  the  discussion  of  this  question 
it  may  be  well  for  the  reader  to  famiHarize  himself  with 
the  titles  that  are  used  by  the  standard  classification. 
These  may  be  found  in  Appendix  A.  The  general  prin- 
ciples which  control  the  selection  of  titles,  however,  may 
be  readily  stated. 

In  the  first  place,  these  accounts  stand  for  congruous 
groups  of  expenditure,  and  their  relative  amounts  meas- 
ure the  cost  of  specific  classes  of  property  or  of  services 
which  are  general  to  the  entire  property.  The  property 
itself,  therefore,  or  the  class  of  services  rendered  bj''  the 
property,  suggests  many  of  the  titles  given  to  the  pri- 


CONSTRUCTION  COSTS  PRIOR  TO  OPERATION  43 

mary  accounts.  For  example,  "Engineering"  covera- 
the  cost  of  all  surveys,  drawings,  specifications,  and  the 
like,  preparatory  to  the  work  of  actual  construction. 
"Grading"  stands  for  another  group  of  congruous  ex- 
penses, and  the  fact  that  grading  is  frequently  done  on 
contract  gives  an  added  reason  for  its  separate  treatment. 
"Bridges,  Tunnels,  and  Culverts"  are  carried  in  a  primary 
account.  Their  construction  is  a  specialty,  and  in  large 
jobs  the  supervision  over  their  construction  is  given  to  a 
special  department  of  the  construction  force.  The  ma- 
terial thus  gathered  for  the  scientific  study  of  bridge 
construction  is  of  itself  ample  justification  for  a  separate 
treatment  of  bridge  expenditures  in  the  classification. 
The  classification  of  primary  accounts  by  congruous 
groups  of  expenditures  reflects  the  peculiar  interest  of 
the  construction  engineer. 

In  the  second  place,  the  responsibilities  of  the  auditor, 
whose  duty  it  is  to  certify  to  the  accuracy  of  the  con- 
struction charges,  and  to  distribute  capital  expenditures 
in  such  a  manner  as  to  enable  him  to  compile  reliable  and 
enlightening  statements,  should  be  permitted  to  influence 
the  framing  of  a  classification  of  construction  expendi- 
tures. This  means  that  the  classification  must  fit  the 
organization  of  the  market  which  suppHes  the  purchasing 
agent  with  those  things  that  are  needed  for  the  construc- 
tion of  a  railway.  The  organization  of  the  market  reflects 
the  organization  of  the  industries  that  produce  the  ma- 
terial purchased,  and  this  organization  for  production, 
in  its  turn,  is  determined  by  the  extent  to  which  and 
the  manner  in  which  the  economic  principle  of  division 
of  labor  is  applied.  In  this  fact  is  found  the  controlling 
principle  for  the  selection  and  definition  of  the  primary 


44       AMERICAN  RAILWAY  ACCOUNTING 

accounts  which  make  up  the  classification  of  construction 
expenditures.  Indeed,  the  test  of  a  satisfactory  classifica- 
tion is  the  extent  to  which  it  conforms  to  the  principle 
of  division  of  labor  as  shown  by  general  business  condi- 
tions. If  it  should  be  found  that  these  classifications  are 
out  of  line  with  the  line  that  separates  those  industries 
that  produce  the  goods  that  railways  need,  this  fact  would 
be  a  serious  criticism  on  the  classification. 

One  cannot  say,  however,  that  the  selection  of  the 
primary  accounts  found  in  the  standard  classification  of 
construction  expenditures  is  the  result  of  the  conscious 
recognition  of  the  principles  of  selection  named  above. 
Such  a  statement,  if  made,  would  not  be  true.  The  ac- 
counting rules  followed  by  construction  auditors  are  the 
result  of  years  of  experience.  These  standard  accounts 
grew;  they  were  never  made.  They  assumed  their  present 
forms  because  of  the  necessity  imposed  on  auditors  of 
checking  the  accuracy  and  reasonableness  of  vouchers 
that  carry  expenditures.  This  cannot  be  done  except 
on  the  basis  of  some  knowledge  of  the  cost  of  producing 
those  things  that  are  brought,  or  of  the  prices  which  they 
currently  bear.  This  is  specialized  knowledge,  and  can- 
not be  gathered  for  an  effective  audit  except  along  the 
lines  laid  down  by  the  organization  of  productive  indus- 
tries; that  is  to  say,  except  on  the  lines  prescribed  by  the 
economic  principle  of  division  of  labor.  Every  primary 
account  in  the  classification  is  an  example  of  the  applica- 
tion of  this  principle. 

Another  consideration  in  the  classification  of  construc- 
tion expenditures,  is  the  use  to  be  made  of  the  construc- 
tion accounts  by  those  who  are  responsible  for  the  financial 
and  operating  administration  of  the  property  subsequent 


CONSTRUCTION  COSTS  PRIOR  TO  OPERATION  45 

to  the  close  of  the  construction  period.  No  classification 
of  construction  expenditures  is  wholly  satisfactory  unless 
it  enables  the  grouping  of  expenditures  used  by  the  con- 
struction engineer  to  be  followed  by  the  engineers  in 
charge  of  addition  and  betterment  work,  and  by  the  super- 
intendents in  charge  of  maintenance  work;  that  is  to 
say,  the  same  principles  of  grouping  should  be  followed, 
so  far  as  the  property  is  concerned,  by  the  construction 
accounts,  by  the  addition  and  betterment  accounts,  and 
by  the  operating  expense  accounts. 

A  single  illustration  will  place  the  reason  for  such  a 
rule  beyond  dispute.  If  the  construction  classification 
shows  the  cost  of  bridges,  and  the  operating  expense 
accounts  show  the  annual  charges  for  repairs,  replace- 
ments and  depreciation  of  bridges,  the  ratio  of  the  cost 
of  annual  maintenance  to  the  cost  of  the  property  main- 
tained provides  a  check  against  either  parsimony  or  ex- 
travagance in  the  maintenance  of  this  class  of  property. 
Such  a  ratio  can  only  be  established  on  the  basis  of  an 
harmonious  clasisfication  of  construction  expenditures 
and  of  operating  expenses.  It  is  highly  important,  there- 
fore, that  construction  expenditures  should  be  classified  in 
full  recognition  of  the  requirements  of  economical  adminis- 
tration after  the  property  has  been  turned  over  for  open 
line  work. 

§  13.  Does  Cost  Measure  Investment? — The  title  of 
the  classification  of  fixed  capital  expenditures  promul- 
gated by  the  Interstate  Commerce  Commission  in  1907 
was  "Classification  of  Expenditures  for  Road  and  Equip- 
ment." The  revised  classification  published  in  1914  is 
issued  under  the  title  "Classification  of  Investment  in 
Road  and  Equipment."    This  seems  to  imply  that,  in  the 


46       AMERICAN  RAILWAY  ACCOUNTING 

later  opinion  of  the  Commission,  the  word  '' investment '^ 
is  synonymous  with  the  word  ''expenditure,"  for  it  cannot 
be  assumed  that  the  general  character  or  purpose  of  the 
classification  has  been  changed. 

The  question  thus  raised  is  an  interesting  question. 
It  has  a  more  or  less  direct  bearing  on  the  determination 
of  a  reasonable  rate  as  that  phrase  seems  to  have  been 
interpreted  by  Court  decisions.  It  is  not  intended  to  dis- 
cuss this  question  in  all  its  bearings.  Attention  may, 
however,  be  called  to  the  opinion  that,  from  one  point  of 
view,  the  substitution  of  the  word  ''investment"  for 
that  of  "expenditures"  seems  to  be  unfortunate.  "In- 
vestment" is  the  broader  word.  It  includes  not  only 
the  expenditures  incurred  in  the  building  of  the  physical 
property  as  measured  in  cash,  but  also  the  subsequent 
burdens  incurred  by  the  stockholders  during  the  period 
in  which  the  property  is  growing  into  a  profitable 
business  enterprise.  This  distinction  was  expressed  by 
Mr.  Franklin  K.  Lane,  of  the  Interstate  Commerce 
Conmfiission,  when  discussing  the  meaning  of  "fair  value" 
in  connection  with  the  first  of  the  "Advanced  Rate 
Cases."  He  said: — 

The  trend  of  the  highest  judicial  opinion  would  indicate  that 
we  should  accept  neither  the  cost  of  reproduction  .  .  .  nor  the 
capitalization  .  .  .  nor  the  price  of  stocks  and  bonds  in  the 
market,  nor  yet  the  original  investment  alone  as  the  test  of 
present  value  for  the  purpose  of  rate  regulations.  Perhaps  the 
nearest  approximation  to  a  fair  standard  is  that  of  a  bona  fide 
investment,  the  sacrifice  made  by  the  owners  of  the  property  .  .  . 
considering  as  a  part  of  the  investment  any  shortage  of  returns 
there  may  be  in  the  early  years  of  the  enterprise.  Upon  this, 
taking  the  life  history  of  the  road  through  a  number  of  years, 
its  promoters  are  entitled  to  a  reasonable  return. 


CONSTRUCTION  COSTS  PRIOR  TO  OPERATION  47 

It  is  evident  that  cost  does  not  measure  investment  in 
the  broad  sense  in  which  that  word  is  used  above.  No 
accountant  can,  from  any  records  in  his  possession,  meas- 
ure a  "bona  fide  investment/'  and  to  ask  him  to  keep  a 
set  of  accounts  the  final  balance  of  which  is  investment 
in  road  and  equipment  is  to  hold  him  responsible  for  what 
in  fact  is  a  judicial  determination.  For  these  reasons,  the 
word  ^^cosV^  and  not  "investment  will  be  used  in  the 
discussion  that  follows.  Cost  is  certain  and  definite.  It 
can  be  checked  against  vouchers  and  bills.  Were  it  pos- 
sible to  check  investment  with  equal  certainty,  a  court 
would  have  no  standing  in  the  consideration  of  this  phase 
of  a  rate  question. 

§  14.  The  Basis  of  Construction  Charges. — The  basis 
of  charges  to  the  construction  accounts  is  cash.  The  cost 
which  these  accounts  record  is,  or  should  be,  the  ipeasure 
of  the  money  investment  at  the  time  and  under  the  con- 
ditions when  the  investment  is  made.  The  pertinency 
of  this  rule  will  be  conceded  when  one  calls  to  mind  the 
quite  general  practice  of  railways,  in  years  gone  by,  of 
making  outstanding  credits  rather  than  cash  the  measure 
of  the  book  cost  of  the  property.  So  far  as  formal  records 
are  concerned,  this  was  done  by  setting  up  on  the  assets 
side  of  the  balance  sheet,  under  the  caption  Cost  of  Road 
and  Equipment,  an  amount  equal  to  the  par  value  of 
the  securities  issued  to  secure  the  money  with  which  to 
build  the  property.  Evidently,  this  amount  might  be 
more  or  less  than  the  cash  cost,  according  as  the  securities 
were  sold  at  a  discount  or  at  a  premium,  to  say  nothing 
of  the  issue  of  bonus  stock.  Such  a  discrepancy  would 
not  arise,  provided  all  charges  to  the  construction  accounts 
were  reduced  to  a  money  or  a  cash  basis,  and,  provided 


48       AMERICAN  RAILWAY  ACCOUNTING 

further,  that  the  total  of  construction  expenditures  be 
transferred  to  the  balance  sheet  as  the  cost  of  the  property. 
It  is  evident  that  the  figure  thus  transferred  could  be 
checked  at  any  time  by  an  inventory,  due  allowance 
being  made  for  appreciation  and  depreciation,  and  for 
changes  in  prices  and  in  the  type  of  property  used,  sub- 
sequent to  the  close  of  the  original  construction  accounts; 
but,  in  order  to  prepare  for  the  apphcation  of  such  a  test, 
the  original  charges  should  be  made  on  the  c£ish  or  money 
basis. 

The  difficulty  in  applying  this  rule  is  found  in  the  quite 
general  practice  of  building  up  large  operating  systems 
through  the  purchase  of  roads  that  were  originally  built 
by  contract  or  by  independent  corporations.  Especially 
difficult  is  it  to  arrive  at  a  just  measure  of  the  money  cost 
of  the  property,  if  the  purchase  is  executed  by  the  sub- 
stitution, at  some  agreed  ratio,  of  the  securities  of  the 
purchasing  company  for  those  of  the  selling  company. 
The  manner  in  which  the  Interstate  Commerce  Commis- 
sion aims  to  meet  this  situation  is  found  in  the  text  of  Ac- 
count 41,  "The  Cost  of  Road  Purchased."  The  text  of 
that  Account  reads: 

When  the  consideration  given  for  the  property  purchased  is 
other  than  cash,  such  consideration  should  be  valued  on  the 
current  cash  basis.  If  the  consideration  includes  the  assump- 
tion of  liabilities,  such  liabilities  shall  be  included  in  the  deter- 
mination of  the  cost  at  their  cash  value  at  the  time  the  contract 
is  made. 

This,  perhaps,  is  as  near  as  it  is  possible  to  realize  the 
rule,  except  in  those  states  where  the  Legislature  assumes 
accounting  jurisdiction  over  railway  contractors,  or  re- 
quires a  detailed  inventory  of  the  line  purchased  at  the 


CONSTRUCTION  COSTS  PRIOR  TO  OPERATION  49 

time  it  is  transferred  to,  or  merged  into,  the  property  of 
the  purchasing  company.  The  rule  that  all  entries  in  the 
construction  accounts  must  be  reduced  to  a  cash  basis 
cannot  be  too  strongly  emphasized. 

§  15.  Labor  and  Material. — The  extent  to  which 
labor  cost  and  material  cost  should  be  kept  separate  has 
been  the  occasion  of  considerable  discussion.  As  a  matter 
of  fact,  there  are  very  few  primary  accounts  in  the  clas- 
sification of  construction  expenditures  that  do  not  cover 
both  kinds  of  payments.  Indeed,  if  the  primary  accounts 
are  drawn  to  reflect  the  different  kinds  of  properties  and 
the  different  services  rendered,  it  is  not  necessary,  from 
the  point  of  view  of  any  responsibihty  assumed  by  the  con- 
struction engineer,  or  by  the  auditor  of  construction  ac- 
counts, to  separate  the  cost  of  labor  from  the  cost  of 
material.  This  is  the  general  answer  to  the  question  raised. 

By  turning  to  the  list  of  primary  accounts  given  in 
Appendix  A,  it  may  be  observed  that  most  of  them 
cover  the  total  cost  of  specific  kinds  of  property,  and, 
as  a  result,  include  both  labor  and  material  costs.  For 
example,  Account  19,  "Fuel  stations'*;  Account  23, 
"Wharves  and  docks";  Account  27,  "Signals  and 
interlockers,"  cover  labor  costs  although  no  specific 
mention  is  made  of  labor.  The  same  is  true  of  less  nu- 
merous but  more  pretentious  kinds  of  property.  For 
example,  Account  28,  "Power  dams,  canals,  and  pipe 
lines,"  or  Account  45,  "Power  plant  machinery."  The 
significant  thing  in  providing  primary  accounts  of  this  sort 
is  to  gather  together  as  a  ledger  entry  the  capital  tied  up 
in  specific  kinds  of  property  built  for  the  purpose  of  render- 
ing certain  definite  services. 

There  are,  however,  a  few  cases  in  which  the  cost  of 


50       AMERICAN  RAILWAY  ACCOUNTING 

material  is  so  significant  a  factor,  in  the  economic  building 
and  administration  of  the  property,  that  it  is  given  sep- 
arate and  independent  primary  accomits.  This  is  true 
of  Ties,  Rails,  Other  Track  Material,  and  Ballast.  The 
labor  of  distributing,  laying,  and  adjusting  ties,  rails, 
and  other  track  material,  is  carried  to  another  account 
called  ''Track  Laying  and  Surfacing."  These  accounts 
together  represent  the  cost  of  the  roadway  after  the  graded 
and  bridged  right  of  way  has  been  constructed.  In  this 
case,  the  analysis  of  cost  into  material  and  labor  seems 
reasonable  because  of  the  significance  of  the  method 
followed  in  the  purchase  of  ties,  rails,  and  ballast,  and 
of  the  advantage  to  the  Superintendent  of  Maintenance 
of  Way  and  Structures  to  know  the  original  unit  prices 
for  these  materials.  There  seems,  however,  to  be  no  con- 
trolling reason  for  a  complete  separation  of  labor  and 
material  in  all  of  the  primary  accounts  of  the  classification 
of  construction  expenditures. 

§  16.  Real  Estate. — No  item  of  cost  in  construction  ac- 
counts has  been  the  subject  of  greater  controversy  than  the 
cost  of  real  estate.  Considerable  portions  of  real  estate 
now  used  in  the  transportation  service  of  American  rail- 
ways were  donated  by  the  public  as  an  inducement  for  in- 
dividuals to  subscribe  the  capital  necessary  for  building  the 
superstructure.  The  records  also  show  that  a  consider- 
able portion  of  real  estate  was  purchased  originally  at  a 
very  low  price.  The  value  of  all  real  estate  used  by  the 
railways  has  appreciated  along  with  the  general  rise  of 
land  values,  and  the  question  consequently  arises  whether 
or  not  the  public  should  pay  freight  and  passenger  charges 
sufficient  to  support  the  present  estimated  land  values  of 
the  land  used  in  the  transportation  service. 


CONSTRUCTION  COSTS  PRIOR  TO  OPERATION  5 1 

While  the  accountant  is  not  called  upon  to  decide,  or 
even  to  consider,  a  question  of  this  sort,  he  is  responsible 
for  furnishing  construction  records  that  show  the  actual 
cost  of  the  real  estate  used  in  transportation.  It  is  for 
courts  and  commissions  to  determine  whether  or  not  this 
figure,  increased  by  subsequent  appreciation,  should  be 
included  as  an  element  in  the  true  measure  of  investment; 
that  is  to  say,  in  the  figure  to  be  used  for  testing  reason- 
able rates. 

It  will  be  noted  by  referring  to  the  list  of  accounts  given, 
that  the  primary  account  in  the  construction  classification 
which  records  the  cost  of  land  is  confined  strictly  to  ''Land 
for  Transportation  Purposes.''  This  limitation  is  necessary 
in  order  that  the  balance  of  construction  accounts  may 
truly  measure  the  amount  of  capital  devoted  to  rendering 
the  services  of  transportation.  The  corporation  which 
owns  the  property  may  have  financial  interests  involving 
land  ownership  quite  independent  of  the  business  of  trans- 
portation, but  these  interests  should  be  recorded  as  a 
separate  set  of  accounts,  or  a  separation  by  some  other 
means  should  be  made  between  the  two  classes  of  real 
estate.  In  no  other  way  is  it  possible  to  arrive  at  the  true 
cost  of  rendering  a  transportation  service. 

A  conmion  experience  of  construction  engineers  is  that 
more  real  estate  must  be  purchased  than  is  used  for  trans- 
portation purposes.  This  results  from  the  fact  that  it 
may  be  cheaper  to  buy  an  entire  farm,  than  to  pay  dam- 
ages to  that  farm  by  running  a  fine  diagonally  through 
the  property.  The  same  may  be  true  in  the  purchase  of 
land  for  borrow  pits,  for  levees  or  dams,  for  the  protec- 
tion of  bridges,  and  for  any  of  the  many  purposes  to 
which  land  is  put  by  a  railway  construction  engineer. 


52       AMERICAN  RAILWAY  ACCOUNTING 

Under  such  conditions,  the  appraised  value  of  the  land 
outside  of  the  right  of  way  and  not  used  for  transporta- 
tion purposes,  should  be  deducted  from  the  amount  of 
money  actually  paid  for  the  property  and  carried  in  a 
real  estate  account.  When  the  property  is  turned  over 
to  an  operating  company,  this  figure  should  be  carried 
on  the  balance  sheet  under  some  appropriate  heading, 
but  it  should  not  be  included  in  the  cost  of  the  property 
used  for  transportation  purposes. 

§  17.  Interest  and  Discounts. — In  the  building  of  any 
property,  considerable  time  must  elapse  between  the  in- 
ception of  the  project  and  the  completion  of  the  work. 
It  is,  therefore,  one  of  the  essential  conditions  for  carrying 
on  construction  work  in  an  economical  manner  that  pro- 
vision be  made  at  the  outset  for  a  sufficient  amount  of 
capital  to  enable  the  work  of  construction,  once  begun, 
to  be  completed  without  interruption.  An  interruption 
of  a  construction  program  means  a  waste  of  capital.  To 
some  extent,  the  poHcy  of  adequate  financial  preparation 
may  be  the  occasion  of  idle  funds,  or  of  cash  on  hand 
that  must  be  loaned  out  at  rates  of  interest  lower  than 
the  rate  paid  js.  or,  assuming  that  funds  can  be  borrowed 
for  delivery  as  needed,  it  is  still  true  that  capital  is  in- 
vested in  roadway  and  rolling  stock  some  considerable 
time  before  the  property  can  be  turned  over  for  operation. 
It  is  manifestly  impossible  that  payment  of  interest  on 
the  capital  borrowed  should  be  deferred  until  such  interest 
can  be  paid  out  of  the  operating  revenues.  At  normal 
rates  of  interest,  no  capital  would  be  secured  by  the  sale 
of  bonds  under  such  conditions,  while  the  promise  of  ab- 
normal rates  to  induce  lenders  to  forego  interest  payments 
for  two  or  three  years  would,  in  the  long  run,  prove  to  be 


CONSTRUCTION  COSTS  PRIOR  TO  OPERATION  53 

an  unnecessary  burden  on  the  enterprise.  It  is  considera- 
tions of  this  sort  that  justify  the  rule  that  interest  which 
accrues  on  borrowed  capital  during  the  construction 
period  of  a  property,  is  properly  included  in  the  cost  of 
the  property. 

Bona  fide  commissions  also,  that  is  to  say,  payments 
for  the  sale  of  bonds  or  the  handling  of  securities,  are  re- 
garded as  an  element  of  cost.  Such  commissions  are 
compensation  for  a  service  rendered. 

The  treatment  of  discounts  on  securities  sold  raises  a 
somewhat  different  question.  It  has  frequently  been 
urged  that  discounts  are  costs,  and  that  provision  should 
be  made  for  them  in  the  construction  accounts.  Except 
as  heretofore  explained,  the  rule  laid  down  by  the  Inter- 
state Commerce  Commission  excludes  discounts  from 
construction  charges.  They  are  not  regarded  as 'an  ele- 
ment in  the  cost  of  the  property. 

A  technical  defense  of  this  rule  is  found  in  the  general 
principle  already  enunciated  that  construction  charges 
should  represent  cash  transactions,  or  that  they  should  be 
reduced  to  the  cash  basis.  A  property  built  out  of  the 
proceeds  of  securities  that  sold  at  a  20%  discount  would 
show  in  its  construction  accounts  only  80%  of  the  par 
yalue  of  the  securities  sold  in  order  to  procure  the  cash 
with  which  to  build  the  property.  Eighty  cents  only  is 
put  into  the  property  for  every  dollar  of  Uability  incurred. 
To  include  the  20%  discount  would  be  to  accept  credit 
instruments  as  a  measure  of  the  cost  of  the  property 
rather  than  the  cash  expended. 

It  is  sometimes  urged  that  discount  is  in  fact  a  deferred 
interest  charge,  and  that  for  this  reason  it  should  be 
treated  in  the  construction  accounts  in  the  same  way  as 


54       AMERICAN  RAILWAY  ACCOUNTING 

straight  interest  accruals.  This  is  one  of  those  loose 
statements  which  is  either  true  or  false,  according  to  the 
definition  assumed  of  the  terms  used.  Discount  as  such 
is  not  interest.  According  to  strict  computation,  a  4% 
bond  sold  at  eighty  is  equivalent  in  all  respects  to  a  5% 
bond  sold  at  par.  For  the  amount  of  cash  delivered  by 
the  lender  the  annuity  paid  by  the  borrower  is  the  same 
in  either  case.  For  every  one  hundred  dollars  capital 
put  into  the  property,  five  dollars  a  year  must  be  paid  as 
interest  whether  the  money  be  obtained  by  the  sale  of  a 
5%  bond  or  a  4%  bond. 

As  a  matter  of  fact,  however,  no  such  market  ever 
existed.  A  market  which  will  absorb  a  5%  security  at 
par  would  buy  a  4%  security  at  less  than  20%  discount. 
Instead  of  paying  eighty  for  a  4%  bond,  such  a  market, 
other  things  being  equal,  will  pay  eighty-two,  or  eighty- 
three.  This  means  that  for  a  given  interest  annuity,  a 
slightly  increased  amount  of  capital  can  be  secured  by 
selling  bonds  at  discount  rather  than  by  selling  them  at 
par.  Should  a  4%  bond  sell  for  82,  the  rate  of  interest 
actually  paid  would  be  4.875+%.  To  finance  a  project 
in  this  way  would  result  in  a  saving  of  twelve  and  one- 
half  cents  on  every  one  hundred  dollars  borrowed.  To 
this  extent,  the  interest  burden  during  the  period  of  con- 
struction is  less  than  would  have  been  the  case  had  the 
bonds  been  sold  at  par. 

What,  then,  is  discount  if  it  be  not  interest?  It  is  a 
bonus  in  the  form  of  a  promise  on  the  part  of  the  bor- 
rower, to  return  to  the  lender,  fifty  years  after  date,  one 
hundred  and  twenty-five  dollars  for  every  one  hundred  dol- 
lars borrowed.  Bonus  stock  is  frequently  issued  to  induce 
lenders  to  invest  in  bonds,  but  no  one  ever  suggested  that 


CONSTRUCTION  COSTS  PRIOR  TO  OPERATION  55 

the  stock  thus  issued  gratuitously  should  be  classed  as  in- 
terest. The  two  inducements,  however,  are  of  the  same 
sort.  Both  of  them,  the  bonus  stock  and  the  discount,  are 
independent  items  in  the  bond  contract.  They  are  both 
in  the  nature  of  a  bonus  to  induce  lenders  to  accept  a 
rate  of  interest  lower  than  the  ruling  rate. 

If  discounts  are  a  bonus,  do  they  properly  find  a  place 
in  the  construction  accounts?  The  answer  to  this  ques- 
tion is  clearly  in  the  negative.  The  object  of  discount 
financiering  is  to  transfer  a  burden  from  the  construction 
accounts  to  the  operating  accounts.  Operating  revenue 
must  eventually  bear  this  burden  and  make  good  the 
bonus.  To  charge  this  bonus  to  construction  would,  in 
effect,  result  in  the  duplication  of  the  burden,  for  it  must 
be  remembered  that,  under  the  accepted  procedure  for 
testing  railway  rates,  the  public,  when  it  buys  railway 
service,  pays  a  reasonable  interest  rate  on  the  investment 
cost  of  the  property.  If,  now,  discount  be  made  a  part  of 
construction  cost,  such  a  charge  to  construction  imposes  a 
perpetual  burden  on  future  revenues  to  the  extent  of  the 
interest  accruals  required  for  its  support.  But  this  does 
not  satisfy  the  contract.  In  addition  to  this  interest  ac- 
crual which  continues  in  perpetuity,  there  must  be  accumu- 
lated out  of  operating  revenues  a  sum,  equal  to  the  dis- 
count, to  be  handed  over  to  the  lender  at  the  maturity  of 
the  bond.  No  accounting  rule  is  sound  which  results  in  im- 
posing on  a  business  a  double  burden.  This  is  one  reason 
why  discounts  should  be  excluded  from  construction  costs. 

Another  sound  rule  of  accounting  is  that  what  must  be 
paid  out  of  revenue  should  be  charged  against  revenue, 
and  the  charging  of  discounts  to  construction  disregards 
this  rule. 


56      AMERICAN  RAILWAY  ACCOUNTING 

The  original  accounts  promulgated  by  the  Federal 
Commission  excluded  discounts  from  construction  costs; 
the  Revision  of  1914  provides  for  the  inclusion  of  a  portion 
of  the  discount  as  a  construction  charge.  The  title  of 
Primary  Account  76  is  "Interest  during  Construction." 
The  text  defining  this  account  reads  in  part  as  follows: 

This  account  shall  also  include  such  portion  of  the  discount 
...  as  is  equitably  assignable  to  the  period  between  the  date 
of  the  actual  issuance  of  securities  and  the  time  when  the  prop- 
erty .  .  .  becomes  available  for  the  service  for  which  it  is  in- 
tended. 

That  is  to  say,  in  the  case  of  a  forty-year  bond  sold  at 
20%  discount,  the  construction  period  being  two  years, 
for  each  one  hundred-dollar  bond,  one-fortieth  of  twenty 
dollars  multiplied  by  two,  or  one  dollar,  would  be  charged 
to  the  construction  account.  The  remainder  of  the  dis- 
count, or  nineteen  dollars,  would  be  charged  against 
revenue  during  the  remaining  thirty-eight  years  of  the 
life  of  the  bond. 

This  adjustment  is  not  as  bad  as  the  practice  of  the 
railways  prior  to  1907.  Then  the  entire  amount  of  dis- 
count was  charged  to  construction.  This  meant,  for  the 
case  stated  above,  that  for  every  eighty  dollars  worth 
of  property  as  it  came  from  the  hands  of  the  construc- 
tion engineer,  the  property  account,  as  well  as  capital, 
would  show  one  hundred  dollars.  According  to  the 
Commission  rules  of  1914,  it  would  show  only  eighty- 
one  dollars.  Under  strict  accounting  analysis,  however, 
the  inclusion  of  one  dollar  of  discount  as  an  item  of  cost 
is  as  culpable  as  the  inclusion  of  twenty  dollars.  Interest 
on  the  one  dollar  may  be  claimed  in  perpetuity  as  a 


CONSTRUCTION  COSTS  PRIOR  TO  OPERATION  57 

charge  against  revenues,  notwithstanding  the  fact  that 
this  amount  must  be  paid  to  the  lender  in  the  final  settle- 
ment of  the  loan  contract,  along  with  the  other  nineteen 
dollars.  A  public  service  corporation,  interested  in  the 
creation  of  the  largest  amount  of  securities  on  a  given 
property  asset,  would  naturally  favor  the  capitalization 
of  discounts;  but  it  is  a  Httle  strange  that  the  Federal 
Conmiission,  which  is  supposed  to  hold  in  mind  the  inter- 
est of  the  public  as  well  as  that  of  the  corporation,  should 
have  approved,  even  in  a  slight  degree,  a  return  to  the 
former  practice. 

§  18.  Depreciation  during  Construction. — The  fact 
that  railway  properties  require  considerable  time  for  their 
completion,  raises  the  question  of  the  proper  treatment 
of  depreciation  during  construction.  This  has  nothing 
to  do  with  the  treatment  of  current  repairs  of  machinery, 
equipment,  or  tools  used  in  construction  work.  The 
cost  of  such  repairs  is  a  construction  cost  and  goes  to  the 
primary  account  that  stands  for  the  class  of  property 
benefited.  The  value  of  the  repairs  stands  in  the  property 
when  turned  over  for  operation.  For  example,  an  hundred 
dollars  spent  on  the  repair  of  a  car  that  has  been  impaired 
by  use  in  bridge  construction  should  be  charged  to  bridges. 
Both  car  and  bridge  will,  by  such  treatment,  be  handed 
over  to  the  operating  department  at  their  true  cost  unless 
affected  by  some  other  item  than  repairs. 

Difficulties  may  arise  in  the  application  of  this  rule, 
but  the  rule  itself  is  approved  by  accounting  sense.  It 
also  leads  to  a  fruitful  generalization.  Whenever  a  con- 
struction charge  can  be  settled,  and  the  accounts  cleared 
during  the  construction  period,  no  depreciation  problem 
can  arise;  but  when  the  dissipation  of  an  asset  is  of  such  a 


58       AMERICAN  RAILWAY  ACCOUNTING 

sort  that  a  final  accounting  cannot  be  made  until  after 
the  close  of  the  construction  period,  some  of  the  reasoning 
that  underlies  depreciation  is  brought  into  play.  For 
example,  the  wear  of  a  car  that  can  be  covered  by  repairs 
is  paid  for  and  settled  during  the  construction  period; 
but  the  loss  in  the  value  of  a  car  with  a  normal  life  of 
twenty  years,  because  it  is  used  for  two  years  in  con- 
struction work,  cannot  be  adjusted  until  the  car  is  retired, 
eighteen  years  after  its  transfer  to  open  line  work.  A 
depreciation  problem  arises  in  this  second  case.  What 
is  to  be  done  with  this  one-tenth  of  the  original  cost  of 
the  car  which  has  been  dissipated  in  the  construction 
service? 

There  is  no  question,  so  far  as  the  correct  distribution 
of  cost  is  concerned,  but  that  an  amount  equal  to  the 
depreciation  of  the  car  should  be  charged  to  the  work 
benefited.  In  the  case  of  the  car  used  in  hauling  bridge 
material,  for  example,  the  decrease  in  the  value  of  the 
car  during  two  years^  use  (that  is  to  say,  one  hundred 
dollars  for  a  thousand  dollar  car  of  twenty  years'  life), 
should  be  charged  to  bridges.  The  bridge  account  would 
not,  otherwise,  carry  its  true  cost.  But  how  is  the  car 
account  to  be  treated?  Shall  this  account  be  credited 
with  one  hundred  dollars,  by  which  means  the  book  state- 
ment of  the  original  cost  of  the  car  is  reduced  to  its  value 
on  the  date  of  transfer,  or  shall  the  car  account,  when 
transferred  to  the  operating  department,  carry  the  original 
cost  of  the  car? 

If  the  car  account  is  credited  with  depreciation,  at  the 
same  time  the  bridge  account  is  charged,  it  is  evident  that 
the  construction  accounts  have  not  been  charged  with 
depreciation.   The  total  cost  of  the  property  as  a  whole  has 


CONSTRUCTION  COSTS  PRIOR  TO  OPERATION  59 

not  been  affected.  Such  accounting  does  no  more  than 
localize  the  construction  value  of  the  property  as  between 
the  various  primary  accounts.  It  is  a  sound  procedure, 
but  it  does  not  result  in  a  charge  for  depreciation  to  con- 
struction. If,  however,  the  car  account  is  not  credited 
with  the  amount  charged  to  bridges  because  of  the  de- 
preciation of  the  car,  the  total  book  cost  of  the  property  is 
thereby  increased.  Depreciation,  imder  such  an  assump- 
tion, is  charged  to  construction,  but  such  a  charge  is 
especially  bad  accounting.  No  accounting  rule  can  be 
approved  which  results  in  the  conversion  of  a  lost  value 
into  a  capital  investment.  When  a  property  is  transferred 
from  construction  to  operation,  its  book  cost  should  carry 
no  charge  for  depreciation  that  has  accrued  during  the 
construction  period.  If,  in  order  to  localize  values  as  be- 
tween different  classes  of  property,  a  charge  for  deprecia- 
tion has  been  made  to  one  primary  account,  it  must  be 
offset  by  a  credit  to  some  other  primary  account.  It  is  a 
little  strange  that  so  manifest  a  truth  should  call  for  state- 
ment. 

The  real  question  that  arises  in  connection  with  de- 
preciation during  construction,  pertains  to  the  credit  rather 
than  the  debit  side  of  the  construction  accounts. 

Many  classes  of  railway  property  suffer  depreciation, 
although  such  property  is  not  used  in  construction  work. 
A  station,  for  example,  has  a  normal  life  of  fifty  years,  but 
two  years  of  that  life  is  passed  before  the  general  prop- 
erty is  transferred  for  open  line  work.  One  twenty- 
fifth  of  the  original  cost  is  thus  dissipated  through  time 
and  weather  during  the  construction  period.  Assuming 
ties  to  have  a  normal  life  of  seven  years,  one  or  two- 
sevenths  of  the  original  cost  of  the  ties  may  have  dis- 


60       AMERICAN  RAILWAY  ACCOUNTING 

appeared  before  a  wheel  earning  revenue  is  hauled  over 
them.  With  the  exception  of  real  estate  and  some  features 
of  the  right  of  way,  depreciation  begins  the  moment  a 
unit  of  physical  property  is  set  up,  and  continues  until 
it  is  retired  from  service.  Shall  the  property  as  a  whole 
be  transferred  to  the  operating  department  at  a  cost  as  it 
stands  on  the  books  of  the  construction  engineer,  or  shall 
this  transfer  be  made  at  a  figure  reduced  by  the  accrued 
depreciation  of  the  property? 

A  definite  answer  may  be  given  to  this  question.  No 
deduction  should  be  made  for  depreciation.  Original  con- 
struction should  be  closed  on  the  basis  of  cash  expenditures. 
The  book  value  of  the  property  should  carry  depreciation 
until  such  time  as  the  property  begins  its  operating  life, 
when  full  responsibility  for  the  restoration  of  all  dissipated 
assets  will  be  assumed  by  operating  revenues.  The  reason 
for  this  may  be  stated  in  a  few  words,  although  such  a 
statement  involves  several  accounting  principles. 

In  the  first  place,  depreciation  of  any  kind,  no  matter 
when  it  accrues,  creates  a  liability.  It  stands  for  the 
dissipation  of  an  asset  which  must  in  some  way  be  made 
good.  To  fail  to  provide  for  making  this  good,  as  would 
be  the  case  if  the  property  were  transferred  to  open  line 
work  at  a  depreciated  figure,  would,  to  the  extent  of  the 
depreciation  thus  written  off,  devalidate  outstanding 
securities.    Such  a  result  is  unthinkable. 

In  the  second  place,  it  is  not  possible  to  make  good  the 
dissipation  of  assets  called  depreciation  by  the  sale  of  new 
bonds.  The  difference  between  the  original  value  and 
the  depreciated  value  of  the  property  stands  for  an  accrued 
liability  of  the  business,  and  liabilities  cannot  be  extin- 
guished by  substituting  one  form  of  liability  for  another. 


CONSTRUCTION  COSTS  PRIOR  TO  OPERATION  61 

The  only  effect  of  replacing  dissipated  assets  called  de- 
preciation by  the  sale  of  new  securities,  would  be  to  render 
permanent  what  otherwise  would  be  a  temporary  de- 
validation  of  securities. 

In  the  third  place,  if  lost  values  during  construction 
must  be  restored  to  the  property,  the  only  fund  available 
for  this  purpose  is  the  operating  revenues  that  accrue  to 
the  property  after  it  has  passed  into  the  hands  of  the 
operating  department.  To  replace  dissipated  assets  is 
a  function  of  maintenance,  and  maintenance  is  an  operat- 
ing expense  charge. 

It  is  then  concluded  that  depreciation  during  construc- 
tion cannot  be  charged  to  construction  in  any  such  manner 
as  to  increase  the  construction  cost  of  the  property  be- 
yond cash  expenditures.  The  replacement  of  depreciation 
of  all  kinds  and  sorts  must  be  borne  by  charges  to  oper- 
ating expenses  spread  over  the  operating  life  of  the  prop- 
erty. Any  other  conceivable  treatment  results  either  in 
a  duplication  of  maintenance  charges,  or  in  the  devalida-  /p 
tion  of  outstanding  securities. 

§  19.  Credits  during  Construction. — Speaking  gen- 
erally, construction  credits  are  of  two  kinds.  They  are 
a  record  of  adjustments  pertinent  to  items  or  amounts 
previously  charged,  or  they  are  receipts  from  transporta- 
tion services  rendered  prior  to  the  transfer  of  the  property 
for  operation. 

Adjustment  credits  should  be  made  to  the  account  that 
carries  the  original  charge.  For  example,  in  order  to 
secure  a  proper  right  of  way,  or  grounds  for  terminals, 
yards,  or  sidings  properly  located,  it  may  be  necessary  to 
purchase  more  land  than  is  actually  required.  When  the 
necessary  amount  of  land  is  finally  determined,  the  value 


62       AMERICAN  RAILWAY  ACCOUNTING 

of  this  excess,  or  the  proceeds  of  its  sale,  if  sold,  should 
be  credited  so  as  to  leave  in  Ledger  Account  2,  ''Land 
for  transportation  purposes,"  the  value  or  cost  of  the  land 
actually  used.  Proceeds  from  the  sale  of  timber,  or  stone, 
or  of  any  improvements  purchased  with  the  land,  should 
filso  be  credited  to  this  account.  Should  the  stones  or 
timber  bought  with  the  land  be  used  in  the  construction 
of  a  bridge,  their  value  should  be  charged  to  the  bridge 
account  as  an  offset  to  their  being  credited  to  real  estate. 
Their  value  is  in  the  property,  but  not  in  the  form  of 
land. 

Another  illustration  is  found  in  the  treatment  of  tools 
or  machinery  purchased  for  construction,  but  not  wholly 
consumed  in  construction  work.  The  estimated  value  of 
such  tools  at  the  close  of  construction  should  be  credited 
to  the  accounts  to  which  they  were  originally  charged, 
the  corresponding  charge  being  determined  by  the  use 
which  it  is  designed  to  make  of  the  tools  or  machinery 
after  the  completion  of  construction  work.  If  the  machin- 
ery and  tools  in  question  are  of  a  sort  to  be  used  in  open 
line  work,  the  residue  of  value  not  consumed  in  construc- 
tion may  be  charged  as  a  part  of  the  ''initial  outfit  of 
roadway  machines,"  or  the  "initial  outfit  of  roadway  and 
track  small  tools,"  (Accounts  37  and  38)  for  which  the 
construction  classification  provides.  If  the  machinery 
and  tools  in  question  are  not  adapted  to  open  line  work, 
they  should  be  carried  as  a  balance  sheet  asset  until  trans- 
ferred for  new  construction  work,  or  converted  into  cash 
through  sale.  The  purpose  controlling  this  kind  of  con- 
stniction  credits  is  simple. 

The  second  kind  of  construction  credits  covers  any 
receipts  or  revenue  that  may  accrue  during  the  period  of 


CONSTRUCTION  COSTS  PRIOR  TO  OPERATION  63 

construction.  Thus,  rents  received  from  the  loan  of 
property,  or  revenues  from  incidental  freight  or  passenger 
traffic,  should  be  credited  to  capital  expenditure  before 
arriving  at  the  final  cost  of  the  property. 

In  the  standard  system  of  accounts  promulgated  for 
the  use  of  American  railways,  provision  is  made  for 
such  a  credit  in  Account  40  "Revenues  and  operating 
expenses  during  construction."  Rentals  paid  are  charged 
and  rentals  received  are  credited  to  this  account.  To 
this  account,  also,  are  credited  the  gross  amounts  re- 
ceived "for  the  transportation  of  commercial  freight  or 
passengers  on  construction  trains,"  and  net  profits  from 
other  sources  of  operating  revenues.  For  American  rail- 
ways which,  in  theory  and  largely  in  practice,  are  con- 
trolled by  the  entreprenneur  interest,  the  simple  rule 
recited  above  may  work  fairly  well.  The  entreprenneur 
has  a  vital  interest  in  closing  the  construction  period  at 
the  earliest  possible  date,  and  there  is  consequently  no 
danger  of  unduly  reducing  construction  totals  by  the 
credit  of  any  large  amount  of  operating  revenues.  It 
seldom  occurs  in  American  practice  that  any  revenue  is 
received  during  construction  other  than  revenue  collected 
"on  construction  trains."  The  interest  on  capital  in- 
vested and  the  expense  of  operating  the  construction 
train  being  charged  as  a  capital  investment,  it  is  proper 
that  the  gross  receipts  accruing  from  such  service  should 
be  credited  to  the  construction  account. 

But  what  is  here  called  the  American  practice  is  not 
the  universal  practice,  even  in  America.  It  sometimes 
occurs  that  the  property,  or  a  portion  of  the  property,  is 
opened  for  operation  before  the  accounts  for  original  con- 
struction are  formally  closed.    In  such  a  case,  the  con- 


64       AMERICAN  RAILWAY  ACCOUNTING 

struction  department  should  set  up  both  an  operating 
revenue  and  an  operating  expense  account,  and  carry  the 
interest  that  accrues  on  the  cost  of  the  property  used  for 
revenue  purposes,  or  a  proper  share  thereof,  as  a  charge 
against  revenue.  The  amount  credited  to  construction 
should  be  the  net  surplus  resulting  from  such  operation 
and  not  the  gross  revenue  as  in  the  first  case  recited. 

There  is,  however,  one  precaution  that  must  be  taken 
in  applying  the  second  of  the  rules  recited  above.  Should 
it  happen  that  the  net  sm-plus  is  considerable,  the  effect 
of  crediting  such  surplus  to  the  cost  of  property  would 
be  to  reduce  that  cost  below  its  true  figure.  The  result 
would  be  to  turn  the  dividend  fund  back  to  the  property 
without  making  acknowledgment  to  the  stockholder  of 
the  moneys  thus  invested.  In  the  application  of  either 
of  these  rules,  it  is  essential  that  the  period  of  construc- 
tion be  not  unduly  prolonged. 

The  figure  transferred  to  the  general  balance  sheet, 
which  represents  the  original  cost  of  the  property,  is  the 
balance  of  all  the  debit  and  credit  entries  carried  by  the 
construction  records.  The  manner  in  which  this  figure  is 
modified  from  year  to  year,  after  the  property  is  taken 
over  for  regular  operation,  will  be  considered  in  the  chapter 
following. 

§  20.  Clearing  Accounts  in  Construction  Accounts. — 
In  the  standardized  "Classification  of  Investment  in 
Road  and  Equipment,"  there  are  two  accounts  which  are 
clearing  accounts  in  a  peculiar  sense.  They  cannot,  be- 
cause of  the  nature  of  the  transactions  that  they  represent, 
be  made  to  carry  the  final  or  permanent  record  of  capital 
expenditures.  The  charges  which  they  receive  must 
sooner  or  later  be  distributed  among  the  other  primary 


CONSTRUCTION  COSTS  PRIOR  TO  OPERATION  65 

accounts.  These  accounts  are  Account  41,  "Cost  of  road 
purchased/'  and  Account  42,  ''Reconstruction  of  road 
purchased." 

A  consideration  of  these  accounts  brings  to  view  one 
of  the  most  embarrassing  situations  for  the  federal  gov- 
ernment in  dealing  with  the  construction  accounts  of 
railways.  The  jurisdiction  of  the  government  is  con- 
fined to  inter-state  carriers;  it  does  not  cover  the  control 
of  local  state  roads  or  of  construction  companies.  Most 
railway  systems,  however,  are  built  out  of  lines  con- 
structed under  contract,  or  small  independent  lines,  from 
which  it  follows  that  the  corporation  that  acknowledges 
the  jurisdiction  of  the  federal  government  may  not  have 
anything  to  do  with  the  construction  of  the  property 
which  it  operates.  The  property  is  bought  after  the 
construction  period  is  closed. 

Moreover,  the  line  purchased  may  cover  not  alone 
physical  property,  but  securities,  franchises,  and  other 
forms  of  intangible  assets.  There  is  no  question  of  the 
propriety  of  charging  the  price  paid  for  property  to  be 
merged  to  the  "  cost  of  property."  The  money  spent  in 
bringing  this  property  up  to  standard,  also,  is  a  proper 
construction  charge  and  should  not  be  classed  as  additions 
and  betterments.  It  is  also  true  that,  ultimately,  this 
cost  of  purchase  should  be  distributed.  Thus,  the  cost 
of  bridges  bought  should  go  to  Account  6,  "Bridges, 
trestles  and  culverts";  that  of  shops  to  Account  20, 
"Shops  and  enginehouses";  that  of  ballast  to  Account 
11,  "Ballast,"  and  so  throughout  the  list.  In  the  text 
of  the  classification,  it  is  distinctly  stated  with  regard 
to  "Cost  of  road  purchased"  that  this  account  "shall 
be  used  only  as  a  clearing  account  in  which  temporarily 


66       AMERICAN  RAILWAY  ACCOUNTING 

to  carry  the  cost  of  road  purchased,  until  such  time  as  a 
plan  for  the  distribution  of  such  cost  to  the  primary  ac- 
counts appropriate  for  the  property  is  approved  by  the 
Commission."  A  similar  credit  is  authorized  for  clearing 
out  the  charges  originally  made  to  Account  42,  "Re- 
construction of  road  purchased." 

No  difficulty  arises  in  carrying  out  the  above  rule, 
provided  the  original  construction  accounts  are  turned 
over  with  the  title  to  the  property.  This,  however,  is 
seldom  the  case.  In  an  old  territory  like  New  England, 
it  is  not  likely  that  30%  of  the  original  records  are 
available.  The  best  that  can  be  done  is  to  make  the 
distribution  on  the  estimate  of  a  competent  engineer. 
The  valuation  of  railway  property  authorized  by  Congress, 
and  now  in  the  process  of  being  made,  will,  when  com- 
pleted, permit  this  account  to  be  cleared  of  all  its  entries. 
This  is  true  of  purchases  made  prior  to  1907.  Purchases 
subsequent  to  1907  are  controlled  by  the  following  order. 

The  carrier  shall  be  prepared  to  furnish  the  Commission, 
upon  demand,  a  full  report  of  the  contract  of  acquisition  of 
each  road,  or  portion  thereof,  purchased,  and  a  statement  show- 
ing in  detail  the  consideration  given  therefor.  It  should  pro- 
cure, in  connection  with  the  acquisition  of  any  such  road  and 
equipment,  all  existing  records,  memoranda,  and  accounts  in 
possession  or  control  of  the  grantor,  relating  to  the  construction 
and  improvements  of  such  road  and  equipment,  and  shall  pre- 
serve such  records,  memoranda,  and  accounts  until  authorized 
by  law  to  destroy  or  otherwise  dispose  of  them.  Where  the 
records,  memoranda,  and  accounts  are  so  intimately  involved 
with  other  records,  memoranda,  and  accounts  of  the  grantor 
as  to  make  their  transfer  impracticable  or  inadvisable,  certified 
copies  of  them  shall  be  procured  and  retained  by  the  grantee. 
The  verity  of  the  copies  should  be  certified  by  the  custodian  of 
the  originals. 


CONSTRUCTION  COSTS  PRIOR  TO  OPERATION  67 

This  is,  perhaps,  a  satisfactory  solution  of  this  difl5cult 
question,  in  view  of  the  conditions  estabhshed  by  cur- 
rent practice  in  the  United  States.  The  rule  can  be 
made  to  secure  proper  accounting  results  provided  it  be 
carefully  administered. 


CHAPTER  IV 

CONSTRUCTION   ACCOUNTS   SUBSEQUENT   TO 
OPERATION 

A  RAILWAY  is  never  completely  built.  The  construction 
accounts  are  never  finished.  What  is  called  the  closing 
of  the  period  of  construction,  is  nothing  more  than  the 
transfer  of  responsibility  for  such  further  construction 
work  as  may  be  necessary,  to  those  railway  officials  who 
are  in  charge  of  the  general  operation  of  the  property. 
This  new  construction  work  is  technically  known  as 
Extensions,  or  as  Additions  and  Betterments;  its  cost, 
like  the  cost  of  original  construction,  is  a  charge  to  the 
property  account.  The  standard  system  of  accounts 
promulgated  by  the  Interstate  Commerce  Commission, 
as  issued  in  1907  and  1908,  provided  for  a  distinct  classi- 
fication of  "Expenditure  for  Additions  and  Betterments". 
This  classification,  which  might  with  propriety  be  called  a 
"job"  classification,  was  in  fact  nothing  more  than  the  as- 
sembling of  a  set  of  clearing  accounts.  It  was  required  that 
all  addition  and  betterment  entries  should  be  distributed 
to  the  primary  accounts  provided  for  original  construc- 
tion. In  the  revision  of  1914,  all  kinds  of  construction 
work  are  covered  by  a  single  classification.  This  change 
is  a  decided  improvement. 

§  21.  The  Significance  of  Terms. — Under  Extensions 
are  included  all  construction  work  designed  to  extend 
the  territory  served  by  the  railway  rather  than  to  supply 
transportation  in  a  better  manner,  or  with  greater  econ- 

68 


ACCOUNTS  AFTER  OPERATION     69 

omy,  in  the  territory  already  controlled.  The  process  is 
like  that  of  building  a  new  factory  to  produce  goods  for 
sale  in  a  more  extended  market,  or  of  establishing  a  new 
branch  for  an  established  commercial  or  banking  business. 
It  includes  the  extensions  of  main  line,  the  building  of 
additional  branch  lines,  or  the  extensions  of  branch  lines 
already  existing.  It  includes  also  the  equipment  or  other 
facihties  necessary  for  working  the  extended  lines.  Ex- 
tensions are,  in  all  important  respects,  original  construc- 
tion work,  and  should  be  so  treated  by  the  accountant. 
The  fact  that  extension  work  may  be  carried  on  under 
the  direction  of  engineers  whose  chief  service  is  claimed 
by  current  operation,  does  not  alter  this  conclusion. 

By  Additions  are  meant  facilities  added  to  those  already 
existing,  such  as  additional  equipment,  tracks,  buildings, 
signals,  bridges,  fences,  and  the  Uke;  additional  ties  laid 
in  tracks,  or  weight  laid  in  rails;  devices  added,  such  as 
automatic  couplers  or  air  brakes  applied  to  cars  not  pre- 
viously equipped.  Investments  of  this  class  are  com- 
monly made  to  meet  the  requirements  of  increased  traflBc, 
increased  safety,  or  increased  economy. 

Under  Betterments  are  included  all  improvements  of 
existing  facilities  which  result  from  the  substitution  of 
superior  parts  for  inferior  parts,  such  as  the  substitution 
of  steel-tired  wheels  for  wheels  of  inferior  make,  the 
strengthening  of  bridges  beyond  the  requirements  of  orig- 
inal specifications,  the  reduction  of  curves  and  grades  after 
the  property  is  turned  over  for  operation,  and  the  like. 
Betterments  may,  like  additions,  result  from  the  pressure 
of  increased  traflSc,  or  they  may  be  in  response  to  some 
comprehensive  policy  adopted  by  the  management.^ 

1  These  definitions  differ  slightly  from  those  on  p.  198,  Appendix  A. 


70       AMERICAN  RAILWAY  ACCOUNTING 

§  22.  Occasions   for   Additions   and   Betterments. — 

Additions  and  Betterments  are  made  to  meet  the  require- 
ments of  five  conditions  which  pertain  to  the  construction 
and  operation  of  railway  properties. 

It  is  not  uncommon,  especially  in  sparsely  settled 
communities,  for  original  construction  to  cover  no  more 
than  the  absolute  necessities  of  immediate  operation. 
This  means  light  rails,  light  ballast,  poor  bridges,  small 
equipment,  high  gradients,  and  sharp  curves;  indeed,  at 
every  point  expense  is  cut  so  as  to  arrive  at  revenue  with 
the  least  possible  immediate  investment.  Compared 
with  standard  construction,  the  property  is  turned  over 
to  the  operating  department  before  the  building  of  the 
property  is  completed.  Under  such  conditions,  the  com- 
pletion of  what  otherwise  would  have  been  covered  by- 
original  construction,  is  treated  by  the  accountant  as  an 
addition  and  betterment.  It  is  this  fact  that  gives  to  the 
phrase  a  different  meaning  for  every  road,  as  also  for  the 
same  road  at  different  stages  of  its  building.  This  being 
the  case,  a  comparison  between  the  addition  and  better- 
ment work  of  different  roads  is  of  minor  significance. 
Addition  and  betterment  charges  are  in  fact  a  continua- 
tion of  the  construction  record,  and  serve  their  highest 
purpose  when  so  understood.  The  propriety  of  beginning 
operation  with  a  half  constructed  property  is  a  matter  of 
policy  for  which  the  accountant  cannot  be  held  respon- 
sible; but  the  accountant  should  resist  the  temptation  to 
twist  accounting  rules  in  order  to  cover  up  or  understate 
the  evil  effects  of  such  a  policy. 

Another  occasion  for  the  use  of  addition  and  better- 
ment charges  is  the  continued  improvement  in  the  science 
of   transportation.     Inventors   are   continually   offering 


ACCOUNTS  AFTER  OPERATION     71 

improved  facilities.  The  development  of  electricity,  and 
the  necessity  of  making  use  of  this  newly  subjected  agency, 
has  produced  marked  results  in  nearly  every  department 
of  railway  economics.  Interlocking  parts  and  safety 
devices,  signals,  gravity  switching,  steel  cars,  loading 
appliances,  and  many  other  devices  which  will  suggest 
themselves  to  the  reader,  are  all  illustrative  of  the  neces- 
sity of  new  investment  in  order  to  keep  a  property  up 
to  the  most  improved  standards.  No  road  that  hopes  to 
continue  can  afford  to  fall  behind  these  standards. 

Additions  and  betterments  are  also  required  to  meet 
the  normal  growth  of  the  traffic.  Railway  building  in 
the  United  States  is  peculiar  in  that  most  of  the  railways 
were  the  forerunners  of  settlements,  and  facihties  which 
were  ample  when  a  road  was  first  constructed  are  in- 
adequate after  the  territory  served  is  settled  and  indus- 
trially efficient.  Under  this  head  may  be  mentioned  new 
sidings  and  turnouts,  second  and  third  tracks,  the  reduc- 
tion of  grades,  and  elimination  of  curves,  heavier  cars, 
heavier  locomotives,  and  heavier  bridges,  and  other  like 
improvements  made  necessary  by  increase  in  the  amount 
and  density  of  traffic. 

Betterments  that  fall  under  this  head  may  be  the  same 
in  kind,  as  also  in  their  general  service,  as  those  described 
above,  but  their  purpose  is  different  as  also  their  influence 
upon  the  industrial  character  of  the  property.  These 
slight  distinctions  must  be  observed  in  order  to  interpret 
properly  the  addition  and  betterment  accounts. 

New  conditions  of  traffic,  as  well  as  an  increase  in 
density,  frequently  demand  expensive  changes  in  the 
property  which  renders  a  transportation  service.  A  road 
built  for  a  lumber  territory  may,  after  the  trees  are  cut, 


72       AMERICAN  RAILWAY  ACCOUNTING 

be  converted  into  a  road  for  general  traffic.  The  shifting 
of  grazing  territory  may  require  a  road  to  change  its  form 
of  equipment.  The  transition  from  wheat  to  corn  as  the 
principal  product  of  farms,  or  the  development  of  diver- 
sified farming,  is  quickly  reflected  in  the  faciUties  which 
railways  must  provide,  while  the  opening  of  fruit  lands  and 
the  increase  of  cold  storage  products  has  been  responsible 
for  the  investment  of  millions  of  dollars  in  improved 
facilities. 

Another  class  of  additions  and  betterments  are  those 
which  are  made  by  railways,  either  voluntarily  or  as  the 
result  of  legislative  suggestion,  to  meet  the  demands  of 
public  opinion.  A  fifty  thousand  dollar  terminal  may 
serve  as  well  for  the  carrying  of  passengers  and  freight 
as  a  terminal  that  costs  a  million.  In  all  ages  of  the  world, 
and  among  all  peoples  that  boast  a  civilization,  the  posses- 
sion of  an  industrial  surplus  seems  to  have  produced  an 
appreciation  for  imposing  buildings  and  stone  monu- 
ments, and  to  some  extent  modern  railways,  possibly  in 
recognition  of  their  semi-pubUc  character,  have  re- 
sponded to  this  universal  sentiment.  The  demand  for 
minor  conveniences  in  travel,  and  for  safety  in  transpor- 
tation also,  working  through  inter-railway  competition, 
imposes  upon  railways  the  necessity  of  a  continuously 
extending  investment.  The  fact  that  railways  are  obliged 
to  spend  money,  or  at  least  do  spend  money,  in  excess  of 
amounts  actually  required  for  profitable  investment, 
raises  many  questions  of  equity  which  cannot  be  here 
considered;  but  in  explaining  additions  and  betterments 
it  is  necessary  to  recognize  this  occasion  for  the  expendi- 
ture of  railway  funds  along  with  the  others  that  have  been 
mentioned.    All  alike  result  in  the  increase  of  the  total  of 


ACCOUNTS  AFTER  OPERATION     73 

construction  charges.  A  satisfactory  system  of  railway 
accounts  will  provide  for  recording  all  these  transactions 
correctly,  and  for  doing  this  in  such  a  manner  as  to  pre- 
serve the  integrity  of  the  figure  which  stands  first  on  the 
assets  side  of  the  balance  sheet,  namely,  ^'Investment  in 
road  and  equipment." 

§  23.  Relation  to  Operating  Expenses. — There  are 
some  reasons  why  the  chapter  on  operating  expenses 
should  have  been  written  before  this  chapter  on  addi- 
tions and  betterments.  The  order  selected  is  in  response 
to  the  desire  to  complete  the  study  of  the  construction 
records  before  turning  to  other  classifications  or  accounts. 

The  relation  that  exists  between  the  construction 
accounts  and  operating  expenses,  springs  from  the  neces- 
sity of  drawing  a  definite  line  between  charges  to  revenue 
and  charges  to  capital.  It  may  be  accepted  as  a  guiding 
rule,  to  be  made  clear  by  the  subsequent  study  of  oper- 
ating expenses,  that  property  turned  over  for  open  line 
work  should  be  maintained  out  of  revenues.  Thus,  all 
repairs  on  property  in  use,  depreciation  whether  due  to 
use  or  to  time,  and  the  expense  incurred  for  the  replace- 
ment of  property  when  retired  from  service,  as  indeed  all 
maintenance  charges  of  whatsoever  kind,  should  be  borne 
by  revenue  and  not  by  capital.  The  rule  is  simple,  but 
its  correct  application  requires  some  care. 

When  property  retired  is  replaced  by  identical  units  of 
property,  costing  the  same  as  the  retired  property  cost 
originally,  no  difficulty  arises.  The  cost  of  replacing 
property  under  such  conditions  is  an  operating  charge  to 
its  full  amount.  There  is  no  question  of  a  capital  charge. 
But  such  a  condition  seldom,  if  ever,  arises.  The  original 
price  of  a  particular  piece  of  property  retired,  that  is  to 


74       AMERICAN  RAILWAY  ACCOUNTING 

say,  the  price  charged  in  the  construction  account,  may 
be  less,  and,  in  this  day  of  rising  prices,  usually  is  less 
than  the  price  that  must  be  paid  for  its  replacement. 
Moreover,  on  account  of  the  continuous  improvement 
in  type,  it  is  seldom  advisable  to  replace  a  worn  out  or 
retired  property  unit  with  a  unit  of  the  same  kind.  A 
better  unit,  and  usually  a  more  costly  unit,  is  put  in  the 
place  of  the  old  unit  retired.  It  is  thus  evident  that  a 
separation  must  be  made  between  the  amount  that  should 
be  charged  to  operating  expense  as  a  maintenance  charge 
and  the  amount  that  should  be  added  to  the  ''cost  of 
construction"  as  a  capital  charge.  In  the  analysis  that 
immediately  follows,  nothing  is  said  about  depreciation 
reserves,  or  salvage.  These  points  will  claim  attention 
in  the  analysis  of  operating  expense. 

§  24.  Treatment  of  Renewals  at  Increased  Prices. — 
The  duty  of  maintaining  the  property  is  properly  imposed 
on  the  revenues  of  an  operating  company.  One  form  of 
meeting  this  responsibility  is  to  charge  the  replacement 
cost  of  property  worn  out,  and  consequently  retired  from 
service,  as  a  maintenance  charge  in  operating  expense. 
In  this  way,  the  property  register  is  kept  full  and,  except 
for  changes  in  prices  and  types,  the  integrity  of  the  figure 
which  stands  for  original  cost  is  maintained.  But  prices 
are  not  stable.  The  cost  of  material  and  labor  are  subject 
to  constant  fluctuation,  a  fact  which  raises  an  important 
question  in  connection  with  replacement  charges.  The 
point  raised  pertains  to  the  basis  of  the  charge.  Shall  the 
amount  charged  to  operating  expense  be  limited  to  the 
amount  of  the  original  capital  charge  for  the  specific 
piece  of  property  retired,  or  shall  it  be  the  cost  of  the 
property  to  be  replaced  in  kind  at  the  time  of  replacement? 


ACCOUNTS  AFTER  OPERATION     75 

Although  the  answer  to  this  question  is  dictated  by 
public  and  corporation  policy,  it  may  be  well  to  consider 
the  accounting  tendencies  involved  in  each  line  of  treat- 
ment. If  the  charge  to  operating  expense  be  Hmited 
to  the  original  cost  of  the  property  replaced,  the  differ- 
ence between  original  cost  and  cost  in  kind  must  be  made 
a  charge  to  additions  and  betterments,  and  to  that  extent 
raise  the  amount  of  investment  carried  as  property  on 
the  balance  sheet.  The  result  of  such  a  rule  of  accounting 
will  be  that  the  current  change  in  prices  will  be  reflected 
in  the  modification,  from  year  to  year,  of  the  figure  which 
is  supposed  to  measure  the  investment  made  by  the  owners 
of  the  property. 

If,  on  the  other  hand,  operating  expenses  are  required 
to  carry  not  only  an  amount  equal  to  the  original  cost  of 
the  property  replaced,  but  an  additional  amount  to  cover 
the  replacement  in  kind  of  the  property  retired,  such 
increased  cost  being  due  to  a  rise  in  current  prices,  no 
charge  will  be  made  to  additions  and  betterments,  and 
the  property  account  will  remain  unchanged.  Under 
such  treatment,  the  property  account  would  not  reflect 
the  changing  price  in  labor  and  material,  and  there  would 
consequently  be  a  tendency  toward  a  separation  of  current 
values  from  book  costs.  That  is  to  say,  an  appraisal  of 
the  property,  ten  or  twenty  years  after  the  close  of  original 
construction,  would  be  greater  (assuming  prices  to  have 
risen)  than  the  construction  cost  carried  on  the  balance 
sheet.  The  tendency  would  be  for  the  appraised  value 
of  the  property  to  follow  along  the  same  line  as  the  move- 
ment in  prices,  while  the  book  value  would  remain  un- 
changed. 

The  determination  of  the  question  thus  raised  rests  on 


76       AMERICAN  RAILWAY  ACCOUNTING 

general  policy  rather  than  on  accounting  principles.  So 
far  as  the  Interstate  Commerce  Commission  has  expressed 
itself,  the  rule  which  now  governs  is  that  operating  ex- 
penses should  cover  the  cost  of  replacing  in  kind  the 
property  retired.  The  corporation  regards  this  as  a  con- 
servative poUcy,  because  it  tends  to  an  under-statement 
rather  than  an  over-statement  of  the  capital  account,  and 
provides  a  margin  of  safety  in  credit  financiering.  The 
public  regards  this  with  favor  because  it  tends  to  check 
stock  dividends  and  over-capitaUzation.  The  benefit 
to  the  public,  so  far  as  rate  controversies  are  concerned, 
in  charging  operating  expense  with  the  cost  incurred  to 
replace  retired  property  in  kind,  is  lost  when  an  appraised 
value  is  substituted  for  investment  cost  for  testing  the 
reasonableness  of  rates. 

The  accountant's  defense  of  the  rule  now  followed  by 
American  railways  rests  upon  the  claim  that  the  actual 
cost  of  replacement  in  kind,  if  carried  to  operating  ex- 
pense rather  than  charged  to  property,  will  tend  to  offset 
the  many  sorts  of  depreciation  that  cannot  be  recognized 
by  formal  charges. 

§  25.  Treatment  of  Renewals  by  the  Substitution  of 
Improved  Types. — In  the  case  of  many  renewals,  the 
property  replaced  is  of  a  different  kind  or  type  than  the 
property  retired.  The  old  American  type  of  locomotive, 
for  example,  has  all  but  disappeared,  its  place  being  taken 
by  locomotives  of  higher  efficiency  and  power.  This 
illustration  may  be  generaUzed  to  cover  almost  any  kind 
or  class  of  property  used  in  the  transportation  service. 
The  accounting  treatment  in  cases  of  this  sort  is  simple  so 
far,  at  least,  as  the  accounting  principle  is  concerned. 
The  rule  is  that  the  difference  between  the  cost  of  re- 


ACCOUNTS  AFTER  OPERATION     77 

placing  in  kind  the  old  unit  of  property  retired,  and  the  " 
cost  of  a  new  unit  of  an  improved  type  which  takes  the 
place  of  the  old,  should  be  charged  to  capital  through 
additions  and  betterments.  Under  such  accounting 
treatment,  the  units  of  property  on  the  property  register 
stand  the  same  as  before  the  replacement  was  made,  but 
the  investment  cost  or  book  value  of  that  property  is 
increased  by  the  amount  of  addition  and  betterment 
charges  made  at  the  time  of  replacement.  Two  or  three 
illustrations  will  make  this  clear. 

Let  it  be  assumed  that  metal  ties  are  substituted  for 
wooden  ties;  in  this  case,  the  excess  cost  of  metal  ties  over 
the  cost  to  replace  in  kind  wooden  ties  removed  would 
be  charged  to  the  property  account.  Should  rails  of  an 
improved  type,  or  quality,  or  weight,  be  substituted  for 
old  rails,  the  excess  cost  of  such  new  rails  over  the  cost 
to  replace  in  kind  the  rails  removed  would  be  a  charge 
to  the  property  account.  Ballasting  offers  another  illus- 
tration. The  cost  of  ballast  applied  in  excess  of  ballast 
required  to  restore  to  its  maximum  height  and  width  the 
ballast  previously  put  on  the  roadbed,  or  the  excess  cost 
of  ballast  over  the  cost  to  replace  in  kind  to  the  original 
height  and  width  the  ballast  that  has  disappeared  through 
use,  becomes  a  charge  to  the  property  account  through 
Additions  and  Betterments. 

In  the  application  of  this  accounting  rule,  the  cost"^ 
rather  than  any  physical  description  of  the  property 
should  be  used  as  a  basis  from  which  to  measure  Additions 
and  Betterments.  Thus,  the  cost  of  newer  and  heavier 
rails,  rather  than  the  cost  of  the  increased  weight  of  the 
rails  which  take  the  place  of  the  old  rails  removed,  should 
be  made  the  basis  of  the  charge.    In  this  way,  the  change 


78       AMERICAN  RAILWAY  ACCOUNTING 

in  the  price  of  rails,  so  far  as  this  change  would  affect 
the  weight  of  the  old  rails,  is  covered  in  the  accounts. 
The  only  element  common  to  all  kinds  and  classes  of 
property  used  in  transportation  is  the  element  of  cost, 
and  for  that  reason  greater  uniformity  in  the  general 
results  will  be  attained  by  accepting  cost  as  the  basis  for 
measurement,  than  if  the  measure  of  the  improvements 
which  follow  the  substitution  of  a  new  type  of  property, 
is  made  on  the  basis  of  some  physical  or  mechanical  ele- 
ment of  the  property. 

§  26.  Abandoned  Property  charged  to  Operating 
Expenses. — Thus  far  the  accounting  rules  which  have 
been  considered,  cover  the  ordinary,  everyday  replace- 
ments of  property  retired.  Many  of  them  occur  in  con- 
nection with  the  current  repair  work  of  an  operating  rail- 
way. Those  rules  are  not,  however,  sufficiently  broad 
to  cover  cases  of  additions  and  betterments  which  in 
fact  amount  to  a  reconstruction  or  a  rebuilding  of  por- 
tions of  the  property.  Such  rebuilding  is  doubtless  an 
addition  and  betterment;  but  the  interests  affected  are 
such  as  to  warrant  speciaUzed  treatment  in  the  accounts. 

It  may  be  well  to  illustrate  this  class  of  work  so  as  to 
make  clear  the  peculiar  situation  to  which  it  gives  rise. 

A  road  may  have  been  located  originally  so  as  to  avoid 
the  bridging  of  streams  or  the  expense  of  deep  fills  or  cuts, 
or  the  cutting  of  tunnels.  The  development  of  traffic,  or 
possibly  the  desire  to  protect  the  old  investment  against 
the  competition  of  new  lines,  makes  relocation  or  re- 
alignment necessary.  This  may  go  so  far  as  to  result  in 
what  is  practically  the  rebuilding  of  the  property.  It  is 
evident  that  relocation  and  realignment  of  the  right  of 
way  renders  worthless  the  real  estate,  the  grading,  the 


ACCOUNTS  AFTER  OPERATION  79 

surfacing,  the  ballasting  of  the  old  right  of  way,  and  such 
like  elements  of  value,  so  far  as  their  use  in  future  trans- 
portation is  concerned.  These  units  become  ''abandoned 
property,"  and  the  loss  in  value  incident  to  such  abandon- 
ment must  be  reckoned  as  a  cost  of  the  betterment. 

Another  illustration  may  be  taken  from  changes  in 
rolling  stock.  A  standard  car  on  American  railways  at 
one  time  was  a  car  of  thirty  thousand  pounds'  capacity; 
it  is  now  sixty  thousand  pounds,  and  there  are  many 
cars  of  a  hundred  or  a  hundred  and  fifty  thousand  pounds' 
capacity  in  current  use.  This  transformation  must  take 
place  quickly,  for  it  is  not  possible  to  use  large  cars  and 
small  cars  with  safety  or  economy  in  the  same  train. 
From  this  it  follows  that  many  cars  will  be  retired  from 
service  before  the  expiration  of  their  normal  life.  Thus, 
a  thirty  thousand  pound  capacity  car  with  a  normal  life 
of  twenty  years,  may  be  retired  at  the  end  of  ten  years  in 
order  to  make  way  for  a  sixty  thousand  pound  capacity 
car.  One-half,  at  least,  of  the  original  cost  of  the  old  car 
is  thrown  away  or  abandoned  to  make  way  for  larger  and 
better  equipment.  The  dissipation  of  this  value  must  be 
regarded  as  an  element  of  cost. 

Perhaps  the  most  effective  illustration  as  showing  the 
burden  of  technical  development  may  be  drawn  from  the 
history  of  the  electric  railways  in  cities.  The  original 
form  in  which  electric  power  was  apphed  to  street  railways 
was  crude  and  inefficient.  This  class  of  property  was  re- 
built three  or  four  times  before  it  assumed  its  modern 
form  as  an  effective  piece  of  transportation  machinery. 
It  is  probably  true,  as  claimed  by  electrical  engineers, 
that  each  step  in  the  development  of  electric  railways  was 
necessary  in  order  to  arrive  at  the  succeeding  step  in  that 


80       AMERICAN  RAILWAY  ACCOUNTING 

development.  Nevertheless,  each  step  involved  the 
abandonment  of  the  whole,  or  a  part,  of  the  previous 
investment,  and  the  resulting  loss  is  an  item  of  cost  in  the 
investment  that  followed.  These  illustrations  should 
make  clear  what  is  meant  by  the  abandonment  of  prop- 
erty in  connection  with  a  program  of  betterment  work. 

The  rule  laid  down  for  the  treatment  of  abandoned 
property  in  the  accounting  system  promulgated  for  the 
use  of  American  railways,  is  that  the  amount  originally 
charged  on  account  of  such  property  should  be  credited 
to  the  property  account.  It  is  imperative  that  the  con- 
struction records  should  be  cleared  of  all  dissipated 
assets. 
(  It  is  frequently  urged  against  this  rule,  that  it  dis- 
regards the  equities  of  investors  in  the  property  abandoned, 
and  appeal  is  taken  to  the  history  of  American  railways 
in  support  of  this  objection.  That  history  shows  that  most 
of  these  railways  outran  settlements.  They  were,  indeed, 
a  condition  of  settlement.  The  circuitous  route  followed 
by  the  roads  when  first  built  is  no  evidence  of  an  error 
on  the  part  of  the  location  engineers.  On  the  contrary, 
the  route  chosen  may  have  been  the  only  route  that  could 
have  been  followed  in  view  of  the  traflSc  in  sight,  and  the 
amount  of  capital  appropriated  for  construction.  The 
analogy  of  bridge  construction  is  brought  to  bear  in  this 
argument.  The  cost  of  the  false  work  used  in  the  con- 
struction of  a  bridge  is  charged  as  a  part  of  the  cost  of 
the  bridge;  why  should  not  the  cost  of  the  first  line  laid 
down,  which  is  a  necessary  step  in  the  development  of  the 
property  as  it  now  stands,  be  regarded  in  the  same  way 
as  the  false  work  of  a  bridge  and  continued  in  the  capital 
account? 


ACCOUNTS  AFTER  OPERATION     81 

There  is  certainly  something  to  be  said  in  favor  of  a 
general  policy  which  recognizes  the  right  of  the  stock- 
holder to  realize  some  benefit  from  his  original  invest- 
ment, when  such  investment  is  rendered  valueless  by 
the  improvement  of  transportation  facilities.  On  the 
other  hand,  it  is  essential  that  the  book  entries  of  cost  at 
any  particular  time  should  reflect  the  cost  of  the  prop- 
erty in  actual  use,  and  not  the  accumulated  cost  of  a 
series  of  transportation  experiments,  although  such  ex- 
periments may  have  been  necessary  to  bring  the  property 
up  to  a  high  degree  of  efficiency.  The  standard  system  of 
railway  accounts  undertakes  to  conform  to  sound  account- 
ing rules,  and  at  the  same  time  to  refrain  from  doing 
violence  to  the  reasonable  claim  of  the  original  investors 
in  the  following  manner: — the  abandoned  property  is 
credited  to  the  property  account,  but,  if  the  values  rep- 
resented by  such  abandonments  are  considerable  in 
amount,  if  they  are  sufficiently  large  to  '' unduly  burden" 
the  operating  expense  of  a  single  year,  they  may  be  carried 
on  the  books  as  an  unadjusted  debit,  to  be  written  out 
in  subsequent  years. 

The  propriety  of  the  above  rule  seems  clear  when  it  is 
recognized  that  most  of  the  improvements  under  considera- 
tion result  either  in  increased  revenue  or  in  decreased 
operating  costs;  that  is  to  say,  they  result  in  the  increase 
of  net  revenue.  If,  now,  the  value  of  the  abandoned 
property  be  carried  as  an  unadjusted  debit  to  be  written 
out  of  the  accounts  after  the  improvements  become 
productive,  it  follows  that  the  increment  of  net  revenues 
which  result  from  the  improvement  may  be  used  to  create 
a  fund  for  the  expungement  of  this  accounting  liability. 
The  public,  on  its  part,  postpones  the  reduction  of  freight 


82       AMERICAN  RAILWAY  ACCOUNTING 

and  passenger  tariffs  until  after  the  value  of  the  abandoned 
property  is  restored  to  the  assets  of  the  road;  while  the 
stockholder,  on  his  part,  foregoes  the  claim  for  increased 
dividends  on  account  of  the  improvements  until  his  lost 
equity  in  the  property  is  restored.  By  this  adjustment, 
no  violence  is  done  to  the  fundamental  principles  of 
accounting,  and  at  the  same  time  the  owners  of  the  prop- 
erty are  relieved  from  bearing  all  the  burden  of  assets 
destroyed  through  improvements.  The  adjustment  above 
outlined  is,  in  effect,  the  creation  of  a  market  for  the 
property  abandoned. 

§  27.  Abandoned  Property  Charged  to  Surplus. — 
The  treatment  of  abandoned  property  above  referred  to 
is  limited  to  property  abandoned  in  connection  with 
improvement  work.  In  case  property  is  abandoned  for 
any  other  reason,  and  on  that  account  is  not  replaced  in 
the  property  register  by  some  other  form  of  property,  the 
final  charge  for  the  elimination  of  such  property  from  the 
accounts,  is  a  charge  to  the  accumulated  surplus  and  not 
to  operating  expense.  The  propriety  of  this  rule  becomes 
evident  when  it  is  remembered  that  operating  expenses 
are  involved  in  the  adjustment  of  assets,  only  so  far  as 
the  revenues  are  called  upon  to  contribute  to  the  main- 
tenance of  the  property.  The  abandonment  of  property 
not  replaced  involves  no  question  of  maintenance  and,  on 
that  account,  operating  expenses  can  not  be  held  respon- 
sible for  writing  such  abandoned  assets  out  of  the  accounts. 
It  should  also  be  held  in  mind  that  that  portion  of  the 
accumulated  surplus  which  is  free  is  in  effect  an  unappro- 
priated reserve  to  take  care,  among  other  things,  of  costs 
which  can  not  be  foreseen.  It  may  also  be  assumed  that 
property  abandoned,  and  not  replaced,  has  contributed, 


ACCOUNTS  AFTER  OPERATION     83 

during  its  life,  to  the  accumulated  surplus,  and  on  this    j 
account  has  a  right  to  appeal  to  it  for  burial.  -J 

It  is  strongly  urged  by  some  accountants  that  property 
abandoned  in  connection  with  improvement  work  ought 
to  be  treated  in  the  same  way  as  property  abandoned 
and  not  replaced.  That  is  to  say,  such  abandonment 
should  not  be  carried  as  an  unadjusted  debit  to  be  written 
out  of  the  accounts  by  subsequent  charges  to  operating 
expense.  A  clear  understanding  of  what  this  means, 
however,  will  not  permit  of  such  an  adjustment.  The 
betterment  which  is  the  occasion  of  the  abandonment 
of  property  is  made  for  the  benefit  of  the  future.  The 
increment  of  net  revenue  which  may  be  assumed,  will 
accrue  at  some  time  subsequent  to  the  investment  in  the 
improved  property  units.  If,  now,  that  portion  of  the 
cost  of  the  improvement  which  stands  for  property 
abandoned  and  which,  on  that  account,  cannot  remain  in 
the  construction  account,  be  charged  to  the  accumulated 
surplus,  it  is  evident  that  a  cost  which  is  incurred  for  the 
benefit  of  the  future  is  borne  by  the  accumulations  of  the 
past.  Only  by  making  a  charge  to  operating  expenses, 
and  spreading  that  charge  over  a  term  of  years,  can  this 
burden  be  thrown  on  those  revenues  which  result  from 
the  productive  use  of  the  improved  property. 

This  argimient  may  be  rendered  more  emphatic  by 
tracing  the  results  of  charging  abandoned  property  to 
the  accumulated  surplus  on  the  interests  of  the  stock- 
holder. The  stockholder  claims  the  full  equity  in  the 
accumulated  surplus,  and  no  one  but  the  pubUc,  under 
the  general  theory  of  reasonable  rates,  can  contest  this 
claim.  Improvements  of  the  kind  under  consideration 
may  involve,  and  usually  do  involve,  the  issue  of  new 


84       AMERICAN  RAILWAY  ACCOUNTING 

securities,  which  means  the  acceptance  of  new  partners 
in  the  enterprise.  The  purchase  of  old  securities  by  out- 
siders does  not  involve  the  acceptance  of  new  partners  in 
the  sense  in  which  that  phrase  is  here  used.  It  is  proper 
from  every  point  of  view  that  the  new  partners  should 
look  to  the  future  for  the  benefits  which  are  to  accrue 
from  their  investments.  They  have  no  claim  upon  the 
accumulated  surplus  which  existed  at  the  time  of  their 
investment.  A  charge  to  the  accumulated  surplus,  how- 
ever, of  the  loss  resulting  from  the  abandonment  of 
property  made  in  connection  with  betterment  work, 
would  throw  the  entire  burden  of  this  pecuKar  cost 
on  the  old  partners.  If,  however,  the  value  of  the  aban- 
doned property  be  written  out  of  the  accounts  by  charges 
to  operating  expenses  spread  over  a  definite  period, 
the  new  investment  will  bear  at  least  a  part  of  the  cost 
of  the  improvement  resulting  from  the  abandonment 
of  property.  It  seems,  then,  whether  this  question  be 
approached  from  the  point  of  view  of  stating  the  true 
revenue  of  definite  periods,  or  of  the  relative  interests  of 
the  old  and  the  new  partners,  that  operating  expenses, 
rather  than  the  accumulated  surplus,  should  assume  the 
burden  of  abandoned  property. 

§  28.  Minimum  for  Additions  and  Betterments. — 
Most  systems  of  accounting  prescribe  a  minimum  below 
which  additions  and  betterments  should  be  excluded 
from  addition  and  betterment  charges.  In  the  system 
of  accounts  as  originally  prescribed  for  American  railways 
that  TYiinirmim  was  $200.  Recognition  of  a  minimum  is 
not  explained  by  the  common  assertion  that  small  amounts 
are  of  too  slight  importance  to  be  made  the  occasion  of 
separate  entries.     The  clerical  work  in  the  accounting 


ACCOUNTS  AFTER  OPERATION     85 

department  is  doubtless  somewhat  reduced  when  slight 
additions  and  betterments  are  covered  as  current  repairs 
in  operating  expenses.  The  only  adequate  reason  for 
this  minimum  is  found  in  the  judgment  of  practical 
accountants  that  the  inclusion  of  a  small  margin  of  current 
improvements  in  operating  expenses,  is  necessary,  as 
an  offset  to  that  unseen  depreciation  which  is  constantly 
going  on,  and  which  cannot  be  made  the  occasion  of 
depreciation  charges.  In  other  words,  a  minimum  of  this 
sort  is  necessary  in  order  to  guard  against  over-charging 
the  capital  accounts.  From  the  point  of  view  of  over- 
capitahzation,  safety  lies  in  a  generous  interpretation  of 
operating  expenses. 

On  the  other  hand,  it  must  be  admitted  that  the  ac- 
counting rule  which  excludes  minimum  charges  for  addi- 
tion and  betterment  work  from  capital,  cannot  be  ad- 
ministered with  any  certainty.  A  program  for  the  same 
work  could  be  drawn  so  as  to  include  or  to  exclude  the 
cost  of  such  work  from  capital,  according  to  the  gen- 
eral policy  approved  by  the  management.  Even  with  the 
best  of  intentions,  accountants  will  differ  in  their  inter- 
pretations of  this  rule.  It  is,  in  short,  a  rule  that  cannot 
be  standardized  by  experience  and,  on  this  account,  is 
likely  to  do  more  harm  than  good.  American  railway 
practice  does  not,  at  present,  recognize  any  minimiun  for 
addition  and  betterment  charges. 


CHAPTER  V 
OPERATING  EXPENSES 

The  system  of  accounts  used  by  American  railways 
makes  a  distinction  between  expenditures  and  expenses. 
The  former  stands  for  the  cost  of  the  property;  the  latter, 
for  the  cost  of  revenue.  This  is  an  arbitrary  distinction, 
but  it  is  of  considerable  practical  benefit  to  the  railway 
accountant.  Unfortunately,  the  paucity  of  accounting 
nomenclature  makes  it  necessary  to  employ  the  word 
expenditure  to  cover,  also,  certain  income  charges,  but 
the  word  expense  is  strictly  confined  to  operation  and 
will  be  so  used  throughout  this  treatise.^ 

§  29.  Definition  of  Operating  Expenses. — Operating 
expenses  may  be  defined  as  the  cost  of  moving  passengers 
and  freight  and  of  rendering  such  other  services  as  per- 
tain to  the  general  business  of  a  transportation  company. 
They  are  a  charge  against  the  transportation  revenues 
of  an  operating  railway. 

Something  of  their  character  may  be  learned  by  observ- 
ing the  place  they  occupy  in  the  general  scheme  of  debit 
records.  Speaking  comprehensively,  the  debit  entries  of  a 
system  of  railway  accounts  (taxes  alone  excepted),  may 
be  classified  under  the  three  heads  of  construction  ex- 
penditures, operating  expenses,  and  corporation  charges, 

1  Note:  This  is  not  quite  true.  The  word  expense  is  found  in  the 
classification  of  construction  expenditures.  In  cases  of  this  sort, 
however,  the  nature  of  the  transaction,  or  the  condition  under  which 
the  charge  arises,  furnishes  ample  explanation. 


OPERATING  EXPENSES  87 

including  under  that  latter  phrase  direct  charges  on  the 
general  balance  sheet,  as  well  as  charges  to  the  income, 
the  profit  and  loss,  and  the  appropriation  accounts. 

The  significant  fact  to  be  gleaned  from  this  observation 
is  that  operating  expenses  are  under  the  control  of  those 
officers  who  are  responsible  for  economy  and  efficiency  in 
operation.  From  this  it  follows  that  the  ruling  considera- 
tion in  drawing  out  a  classification  of  operating  expenses, 
is  the  service  of  the  classification  to  operating  oflficials. 
Even  the  classification  of  construction  costs  is  made  to 
conform  to  this  purpose,  and  the  accountant,  in  distribut- 
ing the  items  that  appear  on  expense  vouchers  and  pay- 
rolls, is  obliged  to  hold  in  mind  the  fact  that  the  chief 
purpose  of  the  statement  which  he  compiles  is  to  enable 
the  General  Manager  to  control  costs. 

Operating  expenses,  as  that  phrase  is  used  in  the  state- 
ments of  the  accounting  department,  do  not,  however, 
necessarily  mean  actual  payments.  A  pajnnent  is  a  cash 
transaction,  and  as  such  pertains  to  the  records  of  the 
treasurer.  The  offset  to  payments  is  receipts,  and  the 
balance  at  any  time  standing  on  the  books  of  the  treasurer 
represents  the  cash  on  hand.  The  records  of  the  account- 
ant, on  the  other  hand,  are  kept  on  the  basis  of  accruals. 
If  a  liability  has  accrued,  it  is  entered  by  the  accountant 
in  his  records,  whether  a  cash  payment  has  been  made 
or  not.  The  offset  to  expenses,  therefore,  is  not  receipts 
but  earnings  or  revenue.  All  the  work  of  a  railway  ac- 
countant is  done  on  the  basis  of  accruals,  a  fact  that 
should  be  held  clearly  in  mind  in  dealing  with  operating 
expenses. 

§  30.  Meaning  of  the  General  Accounts. — In  con- 
formity with  the  purpose  stated  above,  operating  expenses 


88       AMERICAN  RAILWAY  ACCOUNTING 

are  grouped  under  five  general  comprehensive  headings. 
These  headings  are: — 

Maintenance  of  Way  and  Structures, 
Maintenance  of  Equipment, 
Traffic  Expenses, 
Transportation  Expenses,  and 
General  Expenses. 

The  structure  of  an  operating  expense  classification  thus 
indicated  has  been  observed  by  the  Interstate  Commerce 
Commission  since  its  organization  in  1887,  with  the  excep- 
tion that,  prior  to  1907,  Traffic  Expenses  and  Transporta- 
tion Expenses  were  combined  under  a  common  heading. 

Within  a  few  years  after  its  adoption  by  the  Federal 
government,  it  was  accepted  by  the  railway  commissions 
of  the  several  states  and,  at  the  present  time,  is  universally 
followed  by  American  railways.  Its  leading  distinctions 
were  taken  over  from  what  is  known  as  the  Saratoga 
Classification,  which  was  a  classification  adopted  by  a 
few  of  the  leading  state  railway  commissions  at  a  session 
held  in  Saratoga  in  1879.  For  many  years  a  large  number 
of  railways  followed  what  is  known  as  the  Pennsylvania 
classification  which  provided  a  special  general  account 
for  motive  power,  but  that  classification  was  merged  into 
the  standard  classification  in  1896.  It  is  thus  evident 
that  the  classification  of  operating  expenses  now  used 
by  American  railways  is  the  result  of  many  years  of  ex- 
perience and  discussion.  It  is  a  development  which  repre- 
sents the  best  thought  and  experience  of  American  ac- 
countants. 

The  main  headings,  or  general  accoimts,  will  be  cur- 
sorily considered. 

Maintenance  Accounts.  The  first  and  the  second  of  the 


OPERATING  EXPENSES  89 

headings  named  above,  cover  expenses  incurred  in  the 
maintenance  of  the  property  used  in  rendering  the  serv- 
ice of  transportation.  The  separation  of  the  maintenance 
accounts  into  Maintenance  of  Way  and  Structures,  and 
Maintenance  of  Equipment,  rests  on  the  difference  that 
exists  in  the  two  kinds  of  property  and  on  the  technical 
knowledge  required  for  the  treatment  of  each.  The  char- 
acter of  the  duties  assumed  by  the  Superintendent  of  Way 
and  Structures  is  essentially  different  from  that  assumed 
by  the  Superintendent  of  Equipment.  Every  road  suffi- 
ciently large  to  enable  it  to  adopt  the  usual  plan  of  organi- 
zation, separates  the  responsibility  for  the  care  of  these 
two  kinds  of  property,  and  the  standard  classification  of 
operating  expenses  conforms  to  this  established  depart- 
mental organization. 

The  inclusion  of  maintenance  charges  in  the  cost  of 
operation  is  in  recognition  of  a  fundamental  principle  of 
accounting,  as  well  as  of  an  established  rule  of  conmion 
law.  This  rule  is  that  no  industry  can  declare  a  profit 
imtil  full  provision  has  been  made  for  the  restoration  of 
values  dissipated  in  the  production  of  revenue.  This 
consideration  is  especially  pertinent  for  large  industries 
hke  railways,  which  are  administered  on  the  assumption 
of  their  permanence.  A  railway  is  assumed  to  be  a  cor- 
poration of  perpetual  Ufe.  In  this  respect  it  partakes  of 
the  character  of  the  State.  It  is,  therefore,  essential  that 
the  administration  of  each  year  should  transmit  the  prop- 
erty used  in  earning  revenue  to  the  administration  of  the 
year  following  in  as  good  condition  as  when  it  was  received 
from  the  administration  of  the  previous  year.  Should  a 
dividend  be  declared  out  of  ciurrent  revenues  before  mak- 
ing good  the  current  dissipation  of  assets,  such  a  dividend 


90       AMERICAN  RAILWAY  ACCOUNTING 

would  be  erroneously  declared.  Indeed,  it  would  be  no 
dividend  in  the  proper  meaning  of  that  word,  but  a  re- 
payment, under  the  guise  of  a  dividend,  of  a  portion  of 
the  fimds  which  the  stockholder  had  entrusted  to  the 
corporation  for  the  purpose  of  permanent  investment. 
Such  a  dividend  would  be  paid  out  of  capital,  a  transaction 
which  is  universally  recognized  to  be  a  step  toward  bank- 
ruptcy. 

Traffic  Expenses.  The  traffic  department  is  the  sales 
department  of  a  railway.  A  railway  as  a  productive  in- 
dustry differs  from  most  manufacturing  industries  in 
that  it  operates  exclusively  upon  orders.  It  is  the  peculiar 
function  of  the  traffic  department  to  procure  these  orders 
for  service;  that  is  to  say,  to  secure  shipments  of  freight 
and  to  create  the  conditions  under  which  passenger  traflBc 
is  assured.  The  traffic  official  must  know  thoroughly 
the  industrial  conditions  and  business  opportunities  of 
the  territory  through  which  the  railway  runs,  and  under- 
take to  adjust  the  services  of  the  railway  to  the  peculiar 
needs  of  that  territory.  The  sales  department  of  a  rail- 
way is  a  distinctive  branch  of  the  service,  and  for  that 
reason  is  accorded  an  independent  general  account  in  the 
classification  of  operating  expenses. 

Transportation  Expenses.  Transportation  expenses  are 
the  most  important  single  block  of  operating  expenses. 
They  cover  50%  of  the  total.  This  group  of  expenses 
it  is  that  measures  the  cost  of  traffic  movement  and  sug- 
gests by  far  the  larger  number  of  those  questions  that 
center  in  economy  of  operation  and  efficiency  of  manage- 
ment. For  this  reason,  if  for  no  other,  transportation 
expenses,  or  what  with  propriety  might  be  termed  move- 
ment costs,  should  be  grouped  under  a  single  heading. 


OPERATING  EXPENSES  91 

General  Expenses.  General  expenses  are  those  which  are 
common  to  all  departments  and  all  functions  of  an  operat- 
ing railway.  To  some  extent,  also,  this  group  of  expenses 
covers  miscellaneous  items,  which,  if  distributed  to  the 
other  headings,  would  tend  to  weaken  the  sense  of  respon- 
sibility imposed  on  the  chiefs  of  the  several  departments 
in  charge  of  operation.  This  group  of  expenses  covers 
the  salaries  and  oflfice  expenses  of  the  president,  the  secre- 
tary, the  treasurer,  the  accountant,  the  real  estate  agent, 
the  tax  commissioner,  and  other  officers  whose  duties 
are  general  in  character.  It  covers,  also,  the  expenses  of 
relief  departments,  pensions,  and  special  and  temporary 
expenses,  like  the  cost  of  inventories  or  valuations.  It  is 
thus  evident  that  general  expenses  stand  for  a  specific 
line  of  activities  and  responsibilities  and,  while  different 
in  their  scope,  are  on  the  same  footing  as  maintenance, 
traffic,  and  transportation  expenses. 

§  31.  Meaning  of  the  Word  Maintenance. — No  ques- 
tion has  given  rise  to  greater  controversy  than  the  ques- 
tion of  what  constitutes  adequate  maintenance.  The  con- 
fusion \^hich  surrounds  this  question  is  due  primarily  to 
the  different  points  of  view  from  which  it  is  regarded. 
There  are  three  conceptions  bound  up  in  this  word,  and 
those  who  dispute  so  hotly  over  the  appropriate  policy 
of  a  railway  relative  to  maintenance,  or  to  the  test  of 
adequate  maintenance,  are  not  always  clear  as  to  which 
conception  is  under  consideration.  These  three  concep- 
tions of  maintenance  are  as  follows : 

The  general  manager's  conception,  which  recognizes  the 
duty  of  maintaining  railway  property,  used  in  the  service 
of  transportation,  up  to  the  standard  of  maximum  eflS- 
ciency  and  safety. 


92       AMERICAN  RAILWAY  ACCOUNTING 

The  financier's  conception,  which  has  regard  to  some 
established  ratio  between  the  physical  property  and  out- 
standing securities.  This  conception  is  of  more  significance 
for  a  new  property  than  for  a  property  with  well  established 
business  connections. 

The  accountant's  conception,  which  accepts  as  the 
basis  from  which  to  measure  maintenance,  the  original 
cost  of  the  property  as  affected  by  improvements  and 
abandonments,  subsequent  to  the  transfer  of  the  property 
for  open  line  work;  or,  to  use  the  phrase  embodied  in  the 
recent  Act  of  Congress,  the  "original  cost  to  date." 

Provided  one  holds  in  mind  these  three  points  of  view 
from  which  maintenance  may  be  regarded,  it  is  believed 
that  many  of  the  misunderstandings  which  surround  the 
discussion  of  this  subject  will  be  cleared  away. 

It  is  frequently  said  that  there  is  no  depreciation  of 
railway  property,  because  the  Superintendent  in  charge  of 
roadway  and  structures  and  the  Superintendent  in  charge 
of  equipment,  maintain  the  property  up  to  a  point  where  it 
can  earn  the  highest  net  revenue.  Admitting  this  claim 
respecting  the  degree  of  maintenance  to  be  correct,  and 
it  probably  is  correct  from  the  point  of  view  of  the  general 
manager,  the  appraisal  of  such  a  property  would  disclose 
the  fact  that  it  is  operated  at  about  80%  of  what  it  would 
cost  new.  This  general  conclusion  is  supported  by  most  of 
the  appraisals  that  have  thus  far  been  made  of  railway 
property.  Should  more  accurate  appraisals  change  this 
percentage,  the  fact  would  nevertheless  remain  that  the 
maintenance  of  railway  property  stands  considerably 
below  the  original  cost,  or  the  present  reproduction  value 
of  the  property.  If  the  views  of  the  general  manager  are 
to  furnish  a  measure  for  maintenance,  the  balance  sheet 


OPERATING  EXPENSES  93 

statement  of  "investments'^  in  physical  property  will 
be  20%  in  excess  of  the  current  value  and,  should  the 
accounts  fail  to  record  so  significant  a  fact,  this  most  im- 
portant statement  would  close  with  an  overstatement  of 
surplus  to  the  extent  of  the  unrecognized  dissipation  of 
assets.  It  is  quite  proper  for  the  general  manager  to 
accept  efficiency  and  safety  as  the  standard  of  operating 
maintenance,  but  it  does  not  follow  that  the  financier  or 
the  accountant  should  rest  satisfied  with  such  a  standard. 

The  second  point  of  view  from  which  maintenance  may 
be  regarded  is  that  of  the  financier.  For  him  property  is 
maintained  when  liabilities  are  validated.  Railway  bonds 
are  for  the  most  part  mortgage  bonds  and  rest  for  their 
primary  validation  on  specifically  described  items  of 
physical  property.  If  this  property  is  permitted  to  de- 
teriorate below  its  original  standard,  the  securities  to 
that  extent  are  thereby  devalidated.  From  the  point  of 
view  of  the  owner  of  securities,  therefore,  there  is  no 
warrant  for  the  financial  administration  to  accept  and 
apply  the  general  manager's  definition  of  maintenance. 
The  stockholder  and  the  bondholder  cannot  afford  to 
sanction  such  a  policy.  They  are  obliged  to  hold  in  mind 
the  protection  of  their  interests  in  case  the  corporation, 
which  is  the  trustee  for  their  investments,  becomes  in- 
solvent and  passes  into  the  hands  of  a  receiver.  They  do 
not  desire  to  lose  20%  of  their  original  investment,  gone 
no  one  knows  where.  The  only  measure  of  maintenance 
which  it  is  safe  for  them  to  recognize  is  maintenance  to 
original  cost.    They  cannot  afford  to  accept  less. 

The  accountant's  conception  of  maintenance,  which 
accepts  the  original  cost  to  date  as  the  standard  to  which 
property  should  be  maintained,  covers  both  of  the  in- 


94       AMERICAN  RAILWAY  ACCOUNTING 

terests  indicated  above,  and  adds  a  consideration  of  its 
own,  namely:  the  influence  of  constant  change  in  current 
prices  and  types  of  property  on  long  standing  invest- 
ments in  physical  assets.  The  accountant  deals  with  the 
charge  on  his  ledger  for  property  and,  provided  property 
abandoned  is  properly  cared  for  in  the  accounts,  provided 
correct  accounting  rules  for  additions  and  betterments 
are  followed,  and  provided,  further,  that  adjustments  on 
account  of  changing  prices  of  labor  and  material  are  ac- 
tually made  when  old  units  are  replaced  by  new, — the  cost 
of  the  property  as  it  stands  on  the  ledger  will  serve  as  a  safe 
standard  by  which  to  measure  adequate  maintenance. 

§  32.  Depreciation. — Charges  for  the  creation  of  a 
depreciation  reserve  are  charges  for  maintenance  and,  for 
that  reason,  are  carried  by  operating  expenses.  Their 
purpose  is  to  raise  a  reserve  against  which  the  cost  of 
replacing  important  pieces  of  property  may  be  charged 
when,  for  any  reason,  such  property  is  retired.  The 
units  of  property  are  constantly  changing,  but  the  prop- 
erty register,  or  rather  the  original  cost  of  the  property 
that  stands  on  the  register,  must  be  maintained.  The 
dissipation  of  assets  known  as  depreciation  is  a  current 
cost  and  should  be  borne  out  of  current  revenues.  The 
problem  of  depreciation  is  a  problem  that  pertains  pri- 
marily to  operating  expenses. 

No  provision  was  made  for  formal  depreciation  charges 
in  the  classification  of  operating  expenses  used  by  Amer- 
ican railways  prior  to  1907.  For  many  years,  maintenance 
charges  were  covered  by  the  two  primary  accounts  of 
''Repairs"  and  "Renewals  and  Replacements."  The 
system  of  accounting  now  in  use  distributes  maintenance 
charges  to  three  primary  accounts,  namely:  "Repairs/' 


OPERATING  EXPENSES  95 

''Depreciation/'  and  *' Retirements/'  By  turning  to  the  ^ 
list  of  operating  expense  accounts  beginning  on  page  269, 
Appendix  B,  one  observes  that  forty-five  primary  ac- 
counts, out  of  a  total  of  one  hundred  and  ninety-six, 
cover  depreciation  charges.  Each  depreciation  account 
is  in  addition  to  the  repair  account  for  the  same  class 
of  property,  and  is  assumed  to  cover  the  dissipation  of 
assets  that  can  not  be  restored  by  current  repairs.  De- 
preciation charges  are  made  monthly,  and  are  credited 
to  a  reserve  against  which  the  replacement  of  the  property 
can  be  charged  when  the  property  is  replaced.  This 
means  that  the  burden  imposed  on  revenue  of  replacing 
property  when  retired,  is  spread  over  the  operating  life 
of  the  property,  and  is  not  imposed  as  a  lump  sum  on  the 
revenues  of  the  year  when  the  property  is  retired.  This 
is  what  is  meant  by  formal  depreciation  accounting. 

The  real  difference,  then,  between  the  two  methods  of 
procedure,  is  that  the  older  classification  allowed  the  en-  -j 
tire  cost  of  replacing  a  unit  of  property  to  be  charged  to  J 
operating  expenses  at  the  time  of  its  replacement,  while 
the  classification  now  in  use  requires  each  piece  of  prop- 
erty, month  by  month  during  its  life,  to  contribute  to  a 
replacement  reserve  out  of  which  property  is  maintained. 
One  of  the  most  troublesome  questions  that  arise  in  the 
practice  of  accounting  is  to  know  when,  and  under  what 
conditions,  expenses  should  be  spread  over  a  period  of 
time,  and  when  they  should  be  closed  out  by  a  single 
charge.  Depreciation  accounting  assumes  that  main- 
tenance costs  that  cannot  be  localized,  should  be  spread 
over  the  life  of  the  property. 

It  is  thus  evident  that  formal  depreciation  charges  are 
not  essential  for  the  maintenance  of  the  property.     In- 


96       AMERICAN  RAILWAY  ACCOUNTING 

deed,  it  is  possible,  by  assuming  evenly  balanced  condi- 
tions, to  conclude  that  the  same  results  would  follow  the 
application  of  either  of  the  methods  described  above. 
This  may  be  made  clear  by  an  illustration.  Assume  the 
life  of  freight  cars  to  be  twenty  years,  and  that  the  equip- 
ment register  of  a  railway  shows  twenty  series  of  a  thou- 
sand cars  each.  Assume,  further,  the  original  cost  of  all 
cars  to  have  been  the  same  and  that  the  age  of  the  cars 
in  the  several  series  varies  from  one  to  nineteen  years. 
Under  such  conditions,  which  for  the  purpose  of  the 
illustration  have  been  evenly  balanced,  it  would  make  no 
difference  whether  all  of  the  twenty  thousand  cars  con- 
tribute annually  5%  of  their  original  cost  to  a  depreciation 
reserve,  to  which  is  charged  the  cost  of  replacing  one 
thousand  cars  each  year,  or  whether  no  depreciation 
reserve  is  raised  and  the  cost  of  replacing  a  thousand 
cars  each  year  is  charged  directly  to  operating  expenses. 
Under  the  conditions  assumed,  either  procedure  would  re- 
sult in  the  maintenance  of  the  property,  and  the  cost  of 
maintenance  would  be  spread  evenly  over  the  twenty 
years,  during  which  period  every  car  on  the  register  would 
have  been  retired  and  replaced. 

Nevertheless,  a  formal  depreciation  charge  is  desirable, 
and  for  five  reasons. 

In  the  first  place,  a  satisfactory  system  of  accounting 
must  recognize  all  interests  involved  in  a  business.  It 
is  not  enough  to  maintain  property  to  the  requirements 
of  efficiency  and  safety.  The  validation  of  securities 
and  the  maintenance  of  values  notwithstanding  current 
changes  in  the  price  of  labor  and  material  are,  from  the 
point  of  view  of  financial  requirements,  equally  important. 
The  problem  of  depreciation  charges  is  much  broader 


OPERATING  EXPENSES  97 

than  the  problem  for  which  the  general  manager  assumes 
responsibility. 

Formal  depreciation  accomiting,  also,  renders  marked 
assistance  in  drawing  the  line  between  revenue  charges 
and  capital  charges.  Current  dissipation  of  assets  is  not 
due  entirely  to  wear,  or  to  the  effect  of  weather  conditions; 
development  in  the  technique  of  the  instruments  of  trans- 
portation as  shown  in  minor  changes  or  modifications  of 
type,  are  of  equal  importance.  It  is  these  changes  that 
cause  the  retirement  of  property  units  before  the  expira- 
tion of  what  otherwise  would  have  been  their  normal  life. 
There  is  a  depreciation  of  obsolescence  as  well  as  a  depre- 
ciation traceable  to  use  and  to  time.  This  depreciation 
of  obsolescence  represents  an  assemblage  of  minor  changes 
which  result  ultimately  in  a  decided  change  of  type,  but 
no  one  of  which  is  of  sufficient  significance  to  be  classed 
as  an  addition  or  a  betterment.  Past  experience  shows 
this  phase  of  depreciation  to  have  been  as  constant  and 
almost  as  regular  as  the  wear  of  property  through  use, 
and  for  that  reason  the  cost  involved  should  be  borne  by 
current  revenues.  Costs  of  this  kind,  like  ordinary  main- 
tenance costs,  should  be  spread  evenly  over  the  life  of  the 
property  concerned,  and  the  most  certain  way  of  attaining 
this  result  is  to  include  the  depreciation  of  obsolescence, 
along  with  other  forms  of  depreciation,  in  estimating  the 
normal  life  of  the  property  units. 

A  third  consideration  in  support  of  the  poKcy  of  de- 
preciation is  found  in  the  use  that  may  be  made  of  the 
depreciation  reserve,  should  it  become  necessary  to  change 
in  any  particular  the  form  of  capital  investment.  In  case, 
for  example,  the  management  of  a  railway  deems  it  expe- 
dient to  substitute  electric  locomotives  for  steam  loco- 


98       AMERICAN  RAILWAY  ACCOUNTING 

motives,  there  is  no  reason  why  the  reserve  created  by 
charges  for  the  retirement  of  steam  locomotives  should 
not  bear  at  least  a  part  of  the  cost  of  electric  equipment 
by  which  the  steam  locomotives  are  replaced.  Neither 
the  stockholder  nor  the  bondholder  is  interested  in  the 
phj^sical  form  which  his  investment  assumes.  All  this 
interest  asks  is  that  the  value  of  the  investment  shall  not 
be  dissipated  and  that  it  shall  be  in  physical  form  capable 
of  earning  revenue.  The  cost  made  necessary  by  the 
change  is  due  to  gradually  changing  conditions,  and  for 
that  reason  should  be  borne  by  current  revenues.  It  is 
not  claimed  that  this  result  can  not  be  attained  by  other 
accounting  methods,  but  that  formal  depreciation  account- 
ing is  the  easiest,  simplest,  and  most  trustworthy  method 
of  procedure. 

A  fourth  reason  for  formal  depreciation  charges  is 
found  in  the  fact  that  many  railways  do  not  have  a  suffi- 
cient amount  of  property  to  ensure  equitable  results,  in 
case  reliance  is  placed  on  current  replacements  to  main- 
tain their  assets.  Moreover,  all  railways  have  certain 
kinds  of  property  which  involve  such  large  investments 
that  to  charge  their  replacements  to  the  operating  ex- 
penses of  any  particular  month  or  year  would  distort 
accounting  results.  To  operate  a  vessel  property,  for 
example,  without  providing  during  the  Ufe  of  the  vessel 
for  its  ultimate  retirement,  would  never  be  regarded  as 
the  application  of  sound  business  principles. 

A  special  consideration  may  be  urged  in  support  of 
current  depreciation  charges.  In  a  country  where  railway 
securities  are  constantly  bought  and  sold  upon  the  market, 
it  is  of  the  utmost  importance  that  the  monthly  state- 
ment of  net  revenues  from  operations  be  correct.^  This  is 


OPERATING  EXPENSES  99 

true  because  these  statements  exert  a  decided  influence 
on  stock  transactions.  It  is  quite  possible,  should  a  rail- 
way management  so  desire,  to  show  for  any  month  or 
year  a  net  revenue  higher  than  the  true  amount,  by  post- 
poning the  replacement  of  worn  out  property,  and  thus 
permit  the  property  to  deteriorate  without  a  correspond- 
ing entry  in  the  operating  expenses.  In  this  manner  the 
management  could  show  a  net  revenue  from  operation 
higher  than  the  true  net  revenue. 

It  is  the  function  of  accounting  to  ensure  that  current 
statements  are  true,  and  this  can  be  done  with  greater 
certainty  by  means  of  formal  depreciation  charges  than 
by  relying  upon  the  more  or  less  arbitrary  instructions 
of  the  general  manager.  The  temptation  to  influence 
the  market  by  "skinning"  the  property  ought  to  be 
removed  from  those  whom  the  stockholders  have  ap- 
pointed as  trustees  of  their  investment,  and  this  can 
be  done,  in  part  at  least,  by  the  rule  that  regular 
monthly  charges  be  made  for  the  creation  of  a  deprecia- 
tion reserve. 

§  33.  The  Rate  of  Depreciation. — The  rate  of  depre- 
ciation to  be  charged  for  the  creation  of  a  replacement 
reserve  depends  on  the  expectation  of  life  for  the  kind  of 
property  to  be  maintained.  Experience  tables  resting 
on  the  records  of  past  years  are  accepted  as  a  trustworthy 
forecast  of  the  future  and  rates  are  adjusted  accordingly. 
The  reasoning  is  quite  the  same  as  that  employed  by 
insurance  actuaries  for  determining  the  premium  to  be 
paid  for  any  kind  of  insurance.  This  may  be  expressed 
definitely.  Property  that  bears  an  expectation  of  life 
of  twenty-five  years  under  the  condition  of  its  use  should 
contribute  annually  4%  of  its  original  cost,  less  salvage, 


100     AMERICAN  RAILWAY  ACCOUNTING 

to  the  depreciation  reserve.  The  annual  rate  varies  in- 
versely with  the  expectation  of  life. 

The  amount  upon  which  the  rate  is  computed  should 
be  the  original  cost  less  estimated  salvage  at  the  date  of 
retirement.  A  locomotive,  for  example,  carries  a  scrap 
value  of  from  12  to  15%,  which  means  that  the  amount 
to  be  accumulated  in  the  reserve  is  but  from  88  to  85% 
of  the  original  cost.  For  some  reason  not  altogether  clear, 
it  is  the  practice  of  accountants  to  reduce  the  rate  rather 
than  reduce  the  sum  on  which  the  rate  is  computed.  The 
relative  merits  of  these  two  methods  is  scarcely  worth 
discussion;  the  amount  carried  in  the  depreciation  re- 
serve would  be  the  same  in  either  case. 

The  normal  expectation  of  life  for  the  property  having 
been  determined,  as  also  the  amount  to  be  accumulated, 
there  still  remains  the  question  as  to  the  rule  by  which 
depreciation  charges  are  to  be  applied.  Actuarial  ac- 
countants discuss  three  different  rules. 

The  generally  accepted  rule  is  that  a  uniform  rate 
should  be  charged  annually  throughout  the  normal  life 
of  the  property.  This  is  what  is  known  as  "straight  line" 
depreciation.  The  curve  which  represents  its  application 
is  a  straight  line.  The  argument  in  its  favor  is  that  it  is 
simple  and  easily  understood,  and  that  it  takes  from  the 
management  the  temptation  of  arbitrary  adjustments 
for  the  sake  of  making  temporary  showings. 

The  rate  charged  may  vary  from  year  to  year  to 
conform  to  what  is  assumed  to  be  the  facts  respecting 
the  wear  of  the  property,  and  the  wear  of  the  property 
is  assumed  to  vary  with  the  need  of  current  repairs.  While 
the  property  is  new  the  rate  would  be  low,  but  it  would 
increase  year  by  year, — the  percentage  charge  being  at 


OPERATING  EXPENSES  101 

its  maximum  the  year  before  the  retirement  of  the  prop- 
erty. The  reasoning  that  underlies  this  rule  seems  to  be 
the  same  as  that  involved  in  the  discussion  of  the  proposi- 
tion, that  it  is  the  last  straw  that  breaks  the  camel's  back. 
The  truth  is  that  the  loss  of  value  to  be  covered  by  de- 
preciation charges,  is  a  loss  in  excess  of  the  current  wear 
of  property  which  can  be  made  good  by  current  repairs. 
Depreciation  charges  and  repair  charges  are  the  comple- 
ments of  each  other,  the  two  making  the  total  of  dissipated 
assets  to  be  borne  by  current  revenues.  If  the  percentage 
of  repairs  is  high,  it  is  likely  that  the  annual  loss  by  de- 
preciation will  be  low.  If  any  variation  from  a  straight 
annual  charge  is  to  be  allowed,  it  should  be  the  reverse 
of  that  required  by  the  rule  under  consideration. 

A  third  rule  has  been  urged  which  substitutes  a 
definite  annuity  for  a  definite  rate,  and  which  has  the 
result  of  charging  a  decreased  depreciation  rate  for  each 
year  added  to  the  life  of  the  property.  In  this  case,  the 
amount  to  be  contributed  to  the  reserve  during  the  life 
of  the  property  is  first  determined,  and  an  amount  set 
up  for  the  charge  of  the  first  year  which  is  reduced  for 
the  charges  of  each  subsequent  year,  by  the  amount  of 
interest  which  accrues  on  all  the  charges  of  previous  years. 
The  error  of  this  reasoning,  so  far  as  depreciation  reserves 
are  concerned,  lies  in  the  fact  that  it  involves  the  actual 
transfer  of  cash  to  trustees  for  investment.  The  reason 
why,  under  this  plan,  depreciation  charges  to  operating 
expenses  decrease  from  year  to  year,  is  that  a  fund  of 
productive  property  is  accumulated  which  contributes  to 
the  depreciation  reserve  from  income  outside  of  trans- 
portation revenues.  This  rule  cannot  be  applied  unless 
the  management  deems  it  wise  to  create  a  depreciation 


102     AMERICAN  RAILWAY  ACCOUNTING 

fund  to  balance  the  depreciation  reserve,  and  this  is  com- 
monly regarded  as  undesirable  in  ordinary  railway  prac- 
tice. Straight  line  depreciation  charges  are  therefore 
advocated. 

§  34.  Adjustment  of  the  Depreciation  Reserves. — 
Another  technical  question  arises  in  the  use  of  a  de- 
preciation charge.  It  is  the  avowed  purpose  of  these 
charges  to  burden  current  revenues  with  future  pay- 
ments. The  amounts  charged  are  estimates  and  may 
prove  to  be  either  too  high,  or  too  low,  to  replace  the 
property  when  retired.  The  estimate  of  the  value  of 
salvage  may  be  different  from  the  sale  value  of  scrap 
when  the  units  of  property  are  broken  up.  Accidents, 
also,  may  not  have  been  correctly  estimated  with  the 
result  that  an  unduly  large  amount  of  property  is  retired 

J   before  the  expiration  of  its  normal  life.    It  is  not  likely 

•    that  the  depreciation  reserve  will  measure  exactly  the 

L    amounts  that  will  be  charged  against  it. 

/^^  This  situation  may  be  met  by  either  of  two  adjustments. 

/  The  more  perfect  method  is  to  keep  separate  records  for 
j  different  classes  of  property  whose  hfe  history  is  likely  to 
[  show  different  results,  and,  on  the  replacement  of  a  par- 
ticular unit,  to  charge  to  the  depreciation  reserve  only 
so  much  as  that  unit  has  contributed,  the  difference  to  be 
charged  directly  to  the  operating  expenses  of  the  year  in 
which  the  property  is  retired.  For  example,  let  it  be 
assumed  that  the  depreciation  charge  for  a  particular 
series  of  freight  cars  has  been  made  on  the  basis  of  a 
twenty  year  life  period,  and  that  a  car  of  this  series  has 
been  destroyed  at  the  age  of  fifteen  years.  Manifestly, 
only  75%  of  the  cost  of  the  car,  less  salvage,  stands  in  the 
depreciation  reserve.     In  such  a  case,  75%  of  the  cost  is 


OPERATING  EXPENSES  103 

carried  by  the  depreciation  reserve,  and  25%,  less  salvage, 
by  the  expenses  of  the  year  in  which  the  accident  occurred. 
This  is  the  rule  promulgated  for  the  use  of  American  rail- 
ways, and  the  primary  account  of  ''Retirements"  has 
been  provided  for  this  and  similar  charges.  This  is  sound 
accounting,  for  it  charges  to  the  revenue  of  the  year  in 
which  the  accident  occurs  the  cost  of  the  accident.  This 
rule  implies,  also,  that  the  depreciation  charge  on  account 
of  any  piece  of  property  should  be  discontinued  when  it 
has  contributed  its  ledger  cost  to  the  depreciation  reserve. 
In  most  cases  this  will  be  when  it  has  lived  its  normal  life. 
After  that  date,  a  charge  for  depreciation  on  such  property 
should  be  discontinued. 

The  other  method  of  procedure  is  to  rely  on  general 
averages.  The  entire  cost  of  replacement  of  a  unit  of 
property  should  be  charged  to  the  depreciation  reserve 
and  all  units  that  live  longer  than  the  normal  period 
assumed  should  continue  to  contribute  to  the  depreciation 
reserve.  The  consideration  against  this  method  is  the 
fact  that  it  does  not  enable  the  accountant  to  localize 
the  cost  of  accident,  or  of  any  unforeseen  contingency, 
in  his  annual  statement  of  net  operating  revenues.  This 
balance  ought  to  be  determined  with  the  highest  possible 
degree  of  accuracy. 

In  either  case,  the  reserve  carried  may  prove  to  be  too 
high  or  too  low,  and  the  accountant  must  face  the  pos- 
sibility of  changing  the  rate  from  time  to  time  to  i&t  actual 
results.  A  rule  can  be  devised  to  meet  this  contingency. 
In  the  system  of  accounts  used  by  Chinese  railways,  for 
example,  provision  is  made  for  a  sliding  scale  for  the  ad- 
justment of  depreciation  charges.  A  normal  ratio  between 
the  depreciation  reserve  and  the  original  cost  of  the  prop- 


104     AMERICAN  RAILWAY  ACCOUNTING 

erty  is  assumed,  and  the  rate  is  varied  from  year  to  year 
so  as  to  maintain  that  ratio. 

Another  practical  question  arises.  Depreciation  re- 
serves should  begin  with  the  operation  of  the  property, 
but  it  frequently  occurs  that  this  class  of  maintenance 
charges  is  postponed  until  the  property  has  been  op- 
erated for  a  considerable  period.  Under  such  conditions, 
the  question  of  how  to  raise  a  depreciation  reserve  comes 
to  be  a  very  practical  question.  The  simplest  method  is 
to  charge  profit  and  loss,  and  credit  depreciation  reserve 
with  the  amount  of  unrecorded  depreciation.  This  would 
reduce  the  balance  sheet  balance  which  stands  for  free  or 
unappropriated  surplus,  a  result  that  is  entirely  defensible, 
for  the  reason  that  a  surplus  declared  without  having 
made  provision  for  current  depreciation  is  too  high.  Such 
a  procedure,  however,  might  require  a  railway  to  pubUsh 
a  report  which,  if  not  fully  understood,  would  affect  in- 
juriously the  financial  standing  of  the  property.  This 
being  the  case,  it  seems  wiser  to  make  no  drastic  change 
in  the  pubHshed  surplus,  but  to  charge  the  imrecorded 
depreciation  directly  to  operating  expenses,  under  the 
primary  account  "Retirements,"  at  the  time  the  property 
is  actually  retired  and  replaced.  By  this  method,  the 
burden  of  providing  for  unrecorded  depreciation  is  spread 
over  the  remaining  life  of  the  property  that  stands  on  the 
register  at  the  time  a  depreciation  reserve  is  set  up.  In 
this  case,  a  rule  of  accoimting  which  is  sound  in  general 
theory,  is  subordinated  to  considerations  of  business 
pohcy. 

§  35.  Joint  Facility  Accounts. — The  classification  of 
operating  expenses  devised  by  the  Interstate  Commerce 
Commission  for  the  use  of  American  railways,  differs 


OPERATING  EXPENSES  105 

from  the  customary  accounts  prior  to  1907,  in  the  extensive 
use  which  it  makes  of  what  are  known  as  the  joint  facihty 
accounts.  The  operating  conditions  which  give  rise  to 
the  necessity  of  these  accounts  may  be  easily  stated.  A 
considerable  amount  of  property  devoted  to  the  service 
of  transportation  is  used  jointly  by  two  or  more  operating 
railways.  Thus  tracks,  bridges,  yards,  wharves,  stations, 
interlocking  devices,  and  other  facilities,  may  be  used  by 
two  or  more  lines.  The  contracts  or  operating  agreements 
under  which  such  property  is  jointly  used,  cover  a  great 
variety  of  conditions,  and  are  adjusted  according  to  the 
different  aims  and  purposes  of  the  contracting  parties. 
In  every  case,  however,  it  is  necessary  that  the  respon- 
sibiUty  for  the  maintenance  and  operation  of  property 
jointly  used  should  be  correctly  stated,  and  that  the 
accounting  entries  should  truly  represent  the  facts  of 
such  joint  use.  It  should  be  recognized  that  the  debit  and 
credit  entries  required  to  make  final  adjustment  of  this 
class  of  transactions,  are  to  be  found  in  the  records  of  the 
several  corporations  concerned;  while  the  debit  and  credit 
entries  on  the  books  of  a  given  railway,  are  nothing  more 
than  the  shifting  of  charges  between  the  various  primary 
accoimts  of  a  specific  classification.  Provided  this  dis- 
tinction is  held  in  mind,  the  joint  facility  accounts  may 
be  easily  understood. 

The  original  charge  for  the  maintenance  of  facilities 
used  jointly  by  two  or  more  railways,  appears  in  the 
accounts  of  that  railway  which  is  responsible  for  the  ex- 
pense. For  example,  maintenance  charges  for  a  yard 
jointly  used,  appear  as  an  original  charge  in  the  accounts 
of  the  company  which  owns  the  yard,  or  which,  under  the 
agreement,  is  responsible  for  its  maintenance.    It  is  ev- 


106    AMEmCAN  RAILWAY  ACCOUNTING 

ident,  also,  that  to  the  extent  that  this  maintenance  ex- 
pense is  incurred  for  another  hne,  it  will  be  made  the  basis 
of  a  bill  which  the  using  hne  will  be  obhged  to  recognize. 
Prior  to  the  institution  of  the  joint  facility  accounts,  the 
amounts  covered  by  such  a  bill  would  have  been  credited 
by  the  responsible  operating  company  in  its  primary 
accounts,  and  presumably  (although  this  was  not  always 
the  case) a  charge  would  have  been  made  to  the  correspond- 
ing primary  accounts  of  the  using  company.  So  far  as  the 
adjustment  of  interline  accounts  is  concerned,  such  a 
method  attains  a  correct  result  as  far  as  it  goes,  but  it 
fails  to  satisfy  sound  accounting  principles  in  two  partic- 
ulars. 

In  the  first  place,  unless  the  company  which  accepts 
the  bill  distributes  its  charges  to  the  maintenance  accounts, 
in  the  same  way  that  the  company  which  renders  the  bill 
gave  credit  to  its  maintenance  accounts,  it  is  not  possible 
to  add  the  accounting  statements  of  different  lines  and 
arrive  at  a  correct  statement  of  the  amounts  carried  by 
the  various  primary  accounts  of  the  several  companies. 

The  second  difficulty  resulting  from  the  method  of  ad- 
justing interline  accounts  in  the  manner  described  above, 
is,  that  a  credit  by  any  company  to  its  primary  accounts  of 
such  a  portion  of  the  original  charges  as  were  made  for  the 
benefit  of  a  foreign  company,  shows  that  the  officer  in 
charge  of  maintenance  has  spent  less  money  in  mainte- 
nance than  in  fact  has  been  spent.  It  is  essential,  if  the  op- 
erating accounts  are  to  be  used  as  a  means  of  testing  the 
efficiency  of  operating  officers,  that  a  full  and  complete 
acknowledgment  be  made  of  the  work  done,  and  that  the 
entire  expense  of  such  work  be  charged  against  the  re- 
sponsible department.     It  is  primarily  to  arrive  at  this 


OPERATING  EXPENSES  107 

result  that  provision  is  made  for  joint  facility  accounts. 
The  interline  method  of  adjustment  under  the  joint  facil- 
ity accounts,  requires  that  the  original  charges  to  operat- 
ing expenses  on  the  part  of  the  responsible  railway  remain 
unchanged,  but,  to  the  extent  that  these  original  expenses 
have  been  incurred  for  another  line,  the  total  amount 
which  is  made  the  basis  of  bills  against  the  using  hne 
should  be  taken  out  of  operating  expenses  by  a  credit  to 
the  ''joint  facilities"  credit  accounts.  That  is  to  say,  it  is 
taken  out  in  a  single  item  rather  than  by  credits  distrib- 
uted to  the  general  primary  accounts  concerned.  The 
using  company,  also,  which  accepts  this  bill,  does  not  dis- 
tribute the  amount  carried  as  charges  to  its  several  pri- 
mary maintenance  accounts,  but  carries  it  as  a  single  item 
under  the  ''joint  facilities"  debit  accounts. 

The  service  rendered  by  the  joint  facilities  accounts 
may  be  expressed  as  follows.  It  is  desirable  to  obtain 
from  an  operating  expense  statement  two  totals,  each  of 
which  carries  with  it  a  different  significance.  Thus  it  is 
necessary  to  know  the  amount  of  expenses  which  have 
been  actually  incurred  by  the  operating  officers  during 
a  definite  period.  This  figure  stands  for  the  work  which 
has  actually  been  done.  It  measures  the  responsibilities 
imposed  upon  an  operating  officer  and  is  made  the  basis 
of  all  efficiency  investigations.  On  the  other  hand,  it  is 
equally  essential  that  the  operating  expense  statement 
of  each  company  should  accurately  state  the  expense 
incurred  in  earning  its  revenue.  By  the  use  of  the  joint 
facility  debit  and  credit  accounts,  both  of  these  aims  may 
be  readily  secured.  In  order  to  arrive  at  the  efficiency 
figure,  no  credits  are  made  before  summarizing  operating 
expenses;  in  order  to  arrive  at  the  cost  of  revenue,  the 


108     AMERICAN  RAILWAY  ACCOUNTING 

credits  are  deducted  in  a  lump  sum  after  the  charges  to 
the  primary  accounts  have  been  totaled.  In  a  statistical 
summary  which  combines  the  operating  expenses  of  all 
roads,  these  debits  and  credits  will,  of  course,  balance  and, 
consequently,  be  eliminated  from  the  statement,  pro- 
vided all  parties  to  the  joint  use  of  the  property  are  in- 
cluded in  the  statement.  For  these  reasons  joint  facility 
accounts  approve  themselves  to  sound  accounting  prin- 
ciples. 


CHAPTER  VI 
OPERATING  REVENUES 

Although  transportation  as  such  covers  a  wide  range 
of  services,  the  commercial  character  of  the  business  trans- 
actions to  which  it  gives  rise,  is  the  same  for  all  kinds  and 
grades  of  service  rendered,  and  for  that  reason  may  be 
grouped  under  a  single  set  of  accounting  records.  These 
records,  so  far  as  they  cover  the  credit  side  of  railway  opera- 
tions, make  up  the  operating  revenue  accounts. 

§36.  Definition  of  Operating  Revenues. — Operating 
revenues  may  be  defined  as  the  earnings  that  accrue 
from  the  movement  of  freight,  passengers,  mail,  express, 
and  other  goods  however  designated,  and  from  the  render- 
ing of  such  services  as  are  ancillary  to  the  general  business 
of  a  transportation  company.  This  definition  is  the  same 
in  effect  as  the  description  of  the  "Accounts  for  operat- 
ing revenues'*  to  be  found  in  the  oflBcial  classification. 
"The  accounts  provided  for  operating  revenues,"  so 
read  the  instructions,  "are  designed  to  show  amounts 
of  money,  which  a  carrier  becomes  entitled  to  receive  for 
transportation  and  for  operation  incident  thereto." 

It  will  be  observed  that  the  above  definition  is  the 
converse  of  the  definition  of  operating  expenses  to  be 
found  in  the  preceding  chapter.  The  language  is  quite 
the  same  except  that " earnings"  is  substituted  for  "  costs." 
This  is  intentional,  for  something  will  be  gained  if  it 
is  clearly  seen  that  operating  revenues  and  operating 
expenses  are  each   complementary  to  the  other.     The 

109 


110     AMERICAN  RAILWAY  ACCOUNTING 

one  is  the  credit  and  the  other  the  debit  side  of  the  state- 
ment that  closes  with  the  net  balance  that  shows  how 
much  operations  have  contributed  to  the  financial  success 
or  failure  of  the  corporation.  Provided  this  relation  were 
clearly  perceived  and  strictly  observed,  quite  a  number 
of  errors  now  carried  by  the  reports  of  some  railways 
would  be  eliminated. 

It  should  be  further  observed  that  both  the  definition 
given  above,  and  the  instruction  quoted,  distinguish  be- 
tween revenues  and  receipts.  This  is  correct.  Revenue 
as  an  accounting  conception  is  tied  to  service.  It  is  con- 
fined to  moneys  earned  by  services  rendered.  Moneys 
collected  for  other  companies,  or  which  for  any  reason 
lodge  in  the  treasury  of  the  corporation,  but  are  of  no 
benefit  to  the  finances  of  the  corporation,  are  not  revenues. 
While  such  moneys  may  swell  the  cash  on  hand,  they  do 
not  affect  in  the  slightest  the  net  of  operation  or  the  sur- 
plus of  current  transactions. 

The  converse  of  this  is  also  true.  Revenue  may  be 
credited  without  the  receipt  of  money.  Provided  the 
service  has  been  rendered  and  a  Uabihty  thereby  created 
in  favor  of  the  railway,  the  revenue  account  will  take 
credit  for  the  amount  earned  whether  money  has  been 
received  for  the  service  rendered  or  not.  As  stated  in  the 
definition,  revenue  is  earnings  accrued. 

Legal  Character  of  Revenue.  The  conception  of  rev- 
enue for  which  the  foregoing  definition  stands,  comes  a 
little  closer  to  the  situation  as  it  exists,  when  it  is  recog- 
nized that  each  act  of  transportation  rests  on  a  contract 
between  the  railway  as  a  common  carrier  and  the  shipper 
as  a  purchaser  of  transportation  service.  In  the  case  of 
jfreight,  for  example,  the  terms  of  the  contract  are  minutely 


OPERATING  REVENUES  III 

described  in  the  "Freight  Classification,"  in  the  bills  of 
lading,  and  in  the  pubhshed  tariffs.  Here  one  may  learn 
the  conditions  of  packing  for  shipment,  the  character 
and  extent  of  liabilities  assumed  by  the  carrier,  the  use 
of  cars  and  tracks  at  terminals  granted  the  shipper,  the 
units  used  in  computing  revenue,  and  many  other  items 
that  might  be  named.  Freight  tariffs  on  American  rail- 
ways are  quite  complicated  but,  such  as  they  are,  the 
revenue  that  accrues  to  the  railway  is  determined  by 
applying  the  legal  tariff  to  the  actual  service.  This  is 
done,  in  the  first  instance,  by  the  station  agent  who  deals 
directly  with  the  shipper,  but  his  computation  does  not 
fix  the  figure  that  goes  into  the  book  as  revenue.  In 
order  to  arrive  at  the  revenue  for  which  the  accountant 
takes  credit,  all  way  bills,  abstracts,  and  other  similar 
papers,  are  subject  to  audit  in  the  office  of  the  Freight 
Auditor.  Corresponding  papers  for  the  passenger  service 
and  for  miscellaneous  revenues,  are  checked  by  the  Passen- 
ger Auditor,  or  the  Auditor  of  Special  Receipts.  These 
auditors  may  be  called  the  railway's  experts  in  the  apphca- 
tion  of  the  tariffs,  and  the  definition  given  above  of  operat- 
ing revenue  may  be  extended  to  include  the  functions 
that  they  render. 

The  operating  revenue  of  a  common  carrier  is  the 
amount  which  results  from  the  application  of  the  tariff 
to  the  service  as  determined  by  current  audits.  Under 
the  law,  it  is  not  competent  for  a  railway  to  receive  more 
or  less,  nor  for  a  shipper  to  pay  more  or  less,  than  the 
legal  tariff.  The  conception  of  an  operating  revenue  is, 
in  this  country,  a  legal  conception.  Operating  revenue 
is  an  accrued  credit  determined  by  the  judicial  act  of 
an  administrative  officer. 


112     AMERICAN  RAILWAY  ACCOUNTING 

Treatment  of  Corrections.  There  are,  of  course,  cor- 
rections to  be  made  after  the  primary  audit  is  com- 
pleted. This  is  true  because  the  necessity  for  a  quick 
determination  of  current  revenues  warrants  the  state- 
ment of  revenues  for  a  particular  month,  before  all  the 
facts  relative  to  the  transactions  of  that  month  can  be 
reported.  On  a  well  administered  railway  the  revenue 
accounts  of  a  month  are  closed  from  twenty-five  to  twenty- 
eight  days  after  the  close  of  the  month  to  which  they  per- 
tain. In  order  to  meet  this  situation,  the  standard  rules  of 
accounting  provide  that  certain  kinds  of  correction  charges 
may  be  made  against  revenues  when  such  corrections 
are  determined.    For  freight  revenues  they  are  as  follows: 

The  carrier's  portion  of  overcharges  resulting  from  the  use  of 
erroneous  rates,  weights,  classifications  or  computations. 

The  carrier's  portion  of  refunds  on  account  of  errors  in  rout- 
ing and  billing. 

The  carrier's  portion  of  uncollected  revenue  on  freight  lost 
or  destroyed  in  transit. 

The  carrier's  proportion  of  uncollected  tariff  charges  on 
damaged  shipments  for  which  charges  neither  shipper  nor  con- 
signee is  Hable. 

It  will  be  noted  that  the  above-named  charges  against 
revenues  are  due  to  a  misinterpretation  of  the  legal  tariff, 
to  misinformation  as  to  facts,  or  to  a  failure  on  the  part 
of  the  carrier  to  comply  with  the  terms  of  the  contract. 
The  corrections  are  all  in  the  direction  of  a  more  accurate 
statement  of  the  legal  revenue.  Such  charges  against 
revenue  are  defensible,  although  eflScient  administration 
of  the  property  in  all  its  branches,  will  tend  to  reduce 
them  from  a  small  percentage  to  a  vanishing  quantity. 
It  is  their  relative  insignificance  that  justifies  charging 


OPERATING  REVENUES  113 

the  corrections  that  pertain  to  one  month  to  the  rev- 
enues of  subsequent  months.  The  assumption  is  that 
every  month  carries  correction  charges  of  about  the  same 
relative  amount  and  therefore  that  no  month  is  unduly 
charged.  Such  assumptions  are  dangerous,  but  in  this 
case  the  departure  from  strict  accounting  seems  amply 
justified.  If  a  monthly  statement  of  revenues  were  to  be 
withheld  until  the  transactions  of  every  month  could  be 
charged  with  all  the  corrections  that  pertain  to  them,  the 
delay  thus  occasioned  would  render  them  of  slight  signifi- 
cance to  the  management  or  to  the  financier. 

These  correction  charges  must  be  distinguished  from 
failure  on  the  part  of  a  shipper  to  pay  for  a  transportation 
service  actually  rendered.  In  that  case,  revenue  has 
been  earned.  The  management  has  the  right  to  a  credit 
for  service  rendered.  The  loss  due  to  the  failure  of  the 
shipper  to  perform  his  part  of  the  transportation  contract 
cannot  be  charged  against  revenues,  but  must  be  cleared 
out  of  the  accounts  in  some  other  way. 

Absorbed  Expenses,  The  definition  of  operating  reve- 
nues imbedded  in  the  practice  of  American  railways  pro- 
vides for  another  class  of  charges  against  revenues:  that 
is  to  say,  charges  that  stand  for  payments  to  outside  parties 
for  assistance  in  the  execution  of  a  transportation  con- 
tract entered  into  by  a  railway,  and  for  the  execution 
of  which  the  railway  has  taken  credit.  This  class  of 
charges  brings  up  what  is  technically  known  as  an  ab- 
sorbed expense.  An  illustration  will  make  clear  the  mean- 
ing of  this  phrase  and  its  bearing  on  the  definition  of 
operating  revenue.  Assume  that  a  railway  is  obhged,  by 
competitive  conditions,  to  publish  a  tariff  that  contracts 
to  deUver  freight  at  some  point  beyond  the  terminus  of 


114     AMERICAN  RAILWAY  ACCOUNTING 

its  own  line,  and  that  the  payment  of  a  switching  charge 
is  necessary  to  complete  the  haul  covered  by  the  legal 
tariff.  In  such  a  case,  the  true  revenue  of  the  contracting 
railway  would  be  the  amount  which  accrued  under  the 
tariff  less  the  amount  paid  the  switching  company  for 
assistance  in  effecting  delivery. 

That  this  is  correct  accounting  is  evident  when  one 
observes  the  result  of  following  the  only  alternative  treat- 
ment. The  railway  that  takes  the  contract  for  deUvery 
might  set  up  the  entire  amount  which  accrues  under  the 
tariff  as  its  revenue,  and  charge  the  amount  paid  the 
switching  company  as  an  operating  expense.  Net  revenue 
would  be  the  same  as  the  revenue  declared  by  the  former 
method  of  treatment,  but  the  revenues  of  the  two  com- 
panies concerned  in  effecting  delivery  of  the  goods  would 
be  dupUcated  to  the  extent  of  the  switching  payment. 
It  may  be  laid  down  as  a  rule  without  exception  that  no 
railway  should  take  credit  for  revenue  earned  by  the  capi- 
tal and  organization  of  another  railway,  or  of  any  outside 
agency. 

The  principle  of  absorbed  costs  covers  a  wide  range  of 
charges.  The  following  are  mentioned  in  the  definition 
of  freight  revenue  found  in  the  standard  classification  of 
operating  revenue.  They  are  expenses  to  be  absorbed 
by  revenue  and  not  made  a  charge  to  operating  expenses. 

Amount  paid  as  bridge  and  ferry  arbitraries  on  freight. 

Amount  paid  for  completing  a  haul 

Amount  paid  for  elevation  of  freight. 

Amounts  paid  for  switching  services,  in  connection  with  the 
transportation  of  freight,  on  the  basis  of  switching  tariffs,  and 
allowances  out  of  through  rates,  including  the  amounts  paid 
for  switching  empty  cars  in  connection  with  a  freight  revenue 
movement. 


OPERATING  REVENUES  115 

Amounts  paid  for  transferring  freight  between  stations. 
Arbitraries  and  allowances  to  others  for  lighterage  and  wharf- 
age. 

Operating  revenue  is  what  a  railway  earns  with  its  own 
organization  and  its  own  employees,  the  legal  tariff  being 
applied  to  the  service  actually  rendered. 

§  37.  The  General  Revenue  Accounts. — Like  all 
classifications  in  the  standard  system  of  railway  accounts, 
this  classification  is  divided  into  general  and  primary 
accounts.  The  general  accounts,  which  are  main  headings 
under  which  congruous  revenues  are  assembled,  are  four 
in  number,  as  follows: 

Transportation — Rail , 
Transportation — Water, 
Incidental,  and 
Joint  Facility. 

The  first  is  by  far  the  most  important  since  it  carries  97% 
of  all  operating  revenues,  but  the  other  three  call  for 
cursory  explanation,  in  order  to  make  clear  the  structure 
of  the  revenue  classification  as  a  whole.  They  will  be 
considered  in  reverse  order  to  that  of  their  mention.  The 
classification  itself,  including  both  primary  and  general 
accounts,  and  the  instructions  for  their  use,  will  be  found 
in  Appendix  B. 

The  Joint  Facility  Accounts.  The  purpose  of  the 
joint  facility  accounts  in  the  revenue  classification  is 
quite  the  same  as  that  already  explained  for  the  corre- 
sponding expense  accounts.  They  are  designed  to  dis- 
tribute the  net  revenues  that  accrue  from  jointly  operated 
properties,  so  that  each  party  to  a  joint  agreement  will 
be  credited  with  its  proper  share.    This  distribution  may 


116    AMERICAN  RAILWAY  ACCOUNTING 

require  a  company  to  pay  over  to  others  a  part  of  what 
it  has  received  for  services  jointly  rendered,  or  to  accept 
from  others  a  part  of  what  they  have  received.  There 
must  be,  therefore,  both  a  "credit"  and  a  " debit '^  joint 
facility  revenue  account.  The  former  includes  "the 
carrier's  proportion  of  revenue  collected  by  others"  in 
connection  with  the  operation  of  joint  properties;  the 
latter,  "the  proportion  of  revenue  from  the  operation  of 
joint  (propei'ties)  which  is  creditable  to  other  companies." 
By  the  use  of  these  accounts,  it  is  possible  for  current 
records  of  the  operating  company  to  carry  a  single  state- 
ment of  all  the  revenues  that  accrue  to  a  particular  joint 
facility,  and  at  the  same  time  to  cover  with  the  total  of 
its  operating  revenues  only  that  proportion  which  belongs 
to  it.  The  accounts  of  the  "tenant"  companies,  also,  are 
by  this  treatment  properly  adjusted. 

Incidental  Revenue  Accounts.  The  "Incidental"  rev- 
enues covered  by  a  general  heading  are  such  as  accrue 
from  services  which  are  not  in  themselves  transportation 
services,  but  which  must  be  performed  in  order  that  rail- 
way passengers  and  railway  shippers  may  be  served  in 
the  most  effective  and  economical  manner.  They  cover 
such  sources  of  revenue  as  hotels  and  restaurants  kept  by 
the  railway,  parcel  rooms  and  storage,  grain  elevators, 
stockyards,  power  plants  when  power  is  sold,  and  the  like. 
A  parcel  room  at  stations  is  required  for  the  convenience 
of  passengers,  but  for  many  reasons  the  fee  paid  for  a 
parcel  check  could  not  be  covered  in  the  price  of  a  ticket. 
Demurrage  must  be  charged,  but  it  is  not  an  "earning" 
of  transportation.  It  is  rather  a  penalty  charge  imposed 
in  order  to  induce  shippers  to  release  cars;  it  is  no  part  of 
the  price  paid  for  transportation.    These  are  illustrations 


OPERATING  REVENUES  117 

of  the  kinds  of  revenue  brought  together  under  the  gen- 
eral heading  of  incidental  revenues. 

From  the  accounting  point  of  view,  incidental  revenues 
fall  into  two  classes,  namely:  those  that  can  and  those  that 
cannot  be  charged  with  specific  expenses.  For  the  former, 
an  independent  expense  account  is  set  up  in  the  classifica- 
tion of  operating  expenses,  as  will  be  seen  by  turning  to 
Appendix  B,  p.  275,  which  contains  a  fist  of  "Miscellaneous 
operations"  for  which  a  specific  expense  account  is  main- 
tained. All  of  the  operations  here  named  are  to  be  found 
on  their  revenue  side  under  the  general  heading  "Inciden- 
tal" revenues.  The  point  to  be  observed  is  that,  ac- 
cording to  standardized  practice,  the  gross  revenues  from 
miscellaneous  operations  are  included  with  the  gross  oper- 
ating revenues.  This  is  the  usual  statement  as  compiled 
and  published  by  railways.  At  the  same  time,  the  net 
revenue  of  both  groups  of  operations  may  be  read  from 
the  statement,  and  the  net  revenues  of  any  particular 
miscellaneous  service  may  be  read  from  the  accounts. 
This  adjustment  is  the  result  of  the  Revision  of  1914. 
Originally,  the  net  revenues  only  of  miscellaneous  opera- 
tions was  set  forth  in  the  general  statement  of  operations. 

For  the  other  class  of  incidental  revenues,  no  attempt 
is  made  to  segregate  expenses.  "Station,  train  and  boat 
privileges"  appear  in  the  accounts  as  gross  revenue.  The 
same  is  true  of  parcel  room  receipts,  storage  of  freight  or 
of  baggage,  and  the  like.  Expenses  are,  of  course,  in- 
curred in  earning  these  revenues,  but  they  remain  in  the 
accounts  buried  with  other  expenses.  The  amounts  in- 
volved are  relatively  small.  The  needs  of  the  auditor  of 
revenues  are  fully  met,  and  no  serious  error  is  Ukely  to 
arise. 


118     AMERICAN  RAILWAY  ACCOUNTING 

The  same  consideration  explains  the  appearance  of  an 
account  entitled  ''Rents  of  buildings  and  other  property" 
as  a  primary  account  under  the  general  heading  ''Inciden- 
tal" revenues.  According  to  strict  analysis,  all  rents 
should  be  credited  to  income  and  not  to  operation.  It 
stands  for  what  is  received  for  the  loan  of  capital,  and 
not  for  the  rendering  of  a  service.  But  it  is  not  always 
possible  to  arrive  at  the  pure  rent.  In  a  general  office 
building,  for  example,  a  spare  room  may  be  taken  by  a 
tenant  for  a  flat  rate  per  month.  It  is  not  possible  to 
say  how  much  should  be  charged  against  this  rent  for 
heating,  lighting,  elevator  service,  telephone  service, 
janitor  service,  and  the  like.  It  is  not  possible  to  separate 
the  pure  rent  from  the  repayment  of  expenses  incurred 
by  the  railway  for  the  beneJBt  of  the  tenant.  For  this 
reason,  the  entire  amount  is  covered  into  operating 
revenues  as  a  flat  rental  receipt.  The  rule  on  this  point 
carries  the  explanation.  It  says  clearly  that  the  operating 
rental  account  is  to  be  used  only  "when  the  property  is 
operated  and  maintained  in  connection  with  the  property 
used  in  the  carrier's  transportation  operations,  and  the 
expenses  of  maintaining  and  operating  the  rented  portion 
cannot  be  separated  from  the  expenses  of  that  portion 
used  by  the  carrier."  This  distinction  ought  to  be  grasped 
firmly  by  every  accountant,  for  more  mistakes  are  made 
in  the  treatment  of  rentals  than  in  the  treatment  of  any 
other  class  of  entries. 

Transportation — Water  line.  It  will  be  observed  from 
the  above  list  of  general  revenue  accounts,  that  water 
line  transportation  is  given  a  separate  heading.  This  does 
not  mean  that  the  earnings  of  every  boat,  ferry,  or  lighter 
operated  by  a  railway  must  be  classed  as  water  line  rev- 


OPERATING  REVENUES  119 

enue.  On  the  contrary,  rail  line  transportation  includes 
"the  necessary  conveyance  by  water  transfers  (ferries, 
lighterage,  and  floatage)  either  between  track  terminals 
or  between  track  terminals  and  points  not  reached  by 
tracks."  The  ferry  boats  that  carry  cars  from  Frankfort 
in  Michigan  across  the  lake  to  Manitowoc  in  Wisconsin 
are  classed  as  railway  floating  equipment,  and  the  rev- 
enue that  accrues  is  classed  as  rail  line  transportation 
revenue. 

In  contrast  with  the  above,  reference  may  be  made  to 
the  line  of  boats  operated  by  the  Erie  Railway  Company 
between  Buffalo,  New  York,  and  Manitowoc,  Wisconsin, 
or  by  the  Southern  Pacific  Company  between  New  York 
City  and  Galveston,  Texas.  These  are  water  lines  in  the 
technical  sense  of  that  phrase,  and  the  revenue  which 
accmes  from  their  operation  must  be  separately  stated. 
Inasmuch,  however,  as  the  capital  invested  in  the  ships 
and  other  property  used,  is  furnished  by  the  railway  and 
appears  on  the  railway  balance  sheet,  the  water  Hne  trans- 
portation revenue  must  be  covered  into  the  operating 
revenue  of  the  carrier.  Following  the  principles  accepted 
by  the  standardized  system  of  accounts,  this  water  line 
revenue  is  entered  as  a  gross  and  not  as  a  net  amount, 
which  requires  that  a  separate  group  of  expense  accounts 
be  maintained  in  the  classification  of  operating  expenses. 
On  page  275  of  Appendix  B  will  be  found  a  list  of  three 
primary  accounts  which  together  make  up  the  transporta- 
tion expenses  to  be  set  up  as  a  direct  cost  of  water  Hne 
revenue. 

Transportation — Rail  Line,  To  create  rail  line  trans- 
portation revenue  is  the  purpose  for  which  railways 
are  constructed  and  operated.    It  covers  the  earnings  of 


120     AMERICAN  RAILWAY  ACCOUNTING 

the  freight  service  and  of  the  passenger  service.  Speaking 
generally,  freight  service  is  rendered  by  freight  trains, 
and  passenger  service  by  passenger  trains;  but  there  are 
many  cases  of  intermingling  and  of  crossing  over.  Silks, 
for  example,  may  be  shipped  on  freight  bills,  but  the  car 
carrying  the  silks  may  be  coupled  to  a  passenger  train. 
Caretakers  on  stock  trains  go  east  on  freight  trains  and 
west  on  passenger  trains,  the  service  in  both  cases  being 
covered  by  the  cattle  tariff.  Milk,  if  carried  per  package 
regardless  of  weight,  is  passenger  service,  like  mail  and 
express;  but  if  milk  is  carried  by  weight  under  a  tariff, 
the  revenue  that  accrues  is  freight  revenue.  These  are 
but  illustrations  of  the  many  specific  facts  respecting  the 
legal  basis  of  transportation,  and  the  management  of 
trains,  that  must  be  known  before  one  can  understand  or 
use  the  classification  of  rail  line  revenues.  Speaking  gen- 
erally, this  classification  observes  the  distinction  set  up  by 
operating  officials  between  the  freight  service  and  the 
passenger  service. 

There  are,  however,  transportation  revenues  that  go 
with  neither  of  these  services,  the  most  important  being 
that  of  "switching."  The  unit  of  service  in  this  case  is 
neither  the  person  nor  the  thing  carried,  but  the  car. 
The  switching  tariffs,  also,  are  constructed  on  different 
principles  from  those  that  hold  good  in  freight  tariffs  or 
passenger  tariffs.  A  slight  knowledge  of  railway  eco- 
nomics justifies  a  separate  account  for  switching  revenues. 

"Special  service"  trains,  such  as  government  troop 
trains,  circus  trains,  theatrical  trains,  and  the  like,  are 
given  a  separate  account,  and  another  account  for  "  Other 
freight  train"  revenues  is  provided  for  unusual  services 
rendered  by  the  freight  department.    The  classification  of 


OPERATING  REVENUES  121 

rail  line  revenues  confonns  very  closely  to  the  way  in 
which  the  property  is  operated. 

§  38.  The  Two  Considerations  Involved. — The  classi- 
fication of  operating  revenues  should  be  determined  by 
two  considerations.  It  should  meet  the  requirements  of 
the  auditor  of  revenues,  whose  task  it  is  to  see  that  the 
service  has  been  accurately  described  to  the  shipper  or 
the  passenger,  and  that  the  legal  tariff  has  been  correctly 
applied  in  computing  the  revenue.  It  should  also  meet 
the  requirements  of  traffic  officials  whose  duty  it  is  to 
adjust  freight  and  passenger  classifications  and  tariffs 
to  the  industrial  needs  of  the  respective  conamunities 
which  the  railways  serve.  The  first  of  the  considerations 
named  seems  to  have  given  shape  to  the  accepted  clas- 
sification. 

The  Auditor's  Classification,  A  study  of  the  revenue 
classification  makes  it  apparent  that  every  service  suf- 
ficiently distinct  to  claim  the  attention  of  the  General 
Manager  in  framing  instructions  for  operating  employees, 
is  provided  with  a  separate  revenue  account.  Thus,  the 
sleeping  car  service,  the  mail  service,  the  express  service, 
are  each  provided  with  a  separate  revenue  account. 
Services  incidental  to  transportation  like  stockyards, 
elevators,  and  power  plants,  appear  in  the  classification 
as  independent  revenue  producers.  A  considerable  num- 
ber of  relatively  imimportant  revenue  producers,  also, 
like  the  dining  and  buffet  service,  the  parcel  room  service, 
overweight  baggage,  and  storage,  are  given  separate  head- 
ings in  the  classification.  As  compared  with  these  revenue 
producers  of  minor  significance,  which  all  together  do  not 
secure  more  than  7%  of  total  revenues,  the  movement  of 
passengers  which  produces  23%  and  the  movement  of 


1^2    AMERICAN  RAILWAY  ACCOUNTING 

freight  which  produces  70%  of  all  the  revenues  that  accrue 
on  x\merican  railways,  are  provided  each  with  a  single 
primary  account. 

It  must  be  conceded,  in  view  of  such  a  statement,  that 
the  standard  classification  used  by  American  railways 
has  been  worked  out  with  the  interests  of  the  Auditor 
primarily  in  view,  and,  from  this  point  of  view,  it  must 
be  deemed  a  good  classification.  The  organization  of  an 
audit  force  is  easy  when  one  has  this  classification  to  go 
by.  The  instructions  that  must  be  given  the  various 
groups  of  clerks,  as  also  the  blanks  and  forms  placed  in 
their  hands,  are  found,  in  embryo,  in  the  text  that  defines 
the  respective  primary  accounts.  One  can  imagine  the 
floor  space  of  the  rooms  set  aside  for  revenue  audits,  to  be 
divided  up  according  to  this  classification. 

This  is  no  criticism  of  the  classification.  The  needs  of 
the  Auditor  ought  to  be  recognized.  It  is,  however,  a 
question  of  some  importance,  whether  or  not  this  clas- 
sification of  operating  revenues  should  be  adjusted  ex- 
clusively to  the  convenience  of  revenue  audits.  Is  there 
not  a  deeper  meaning  in  revenue  accounting  that  should 
be  recognized  in  the  analysis  and  classification  of  operating 
revenues?  While  there  are  hints,  here  and  there,  of  the 
influence  of  the  services  rendered  by  the  traflSc  officials, 
the  Traffic  Manager,  so  far  as  useful  information  drawn 
from  this  standardized  classification  of  revenues  is  con- 
cerned, must  content  himself  with  the  crumbs  that  fall 
from  the  Auditor's  table. 

The  Traffic  Manager's  Classification.  The  traffic  de- 
partment is  the  weak  spot  in  the  American  railway 
situation.  As  salesmen  of  transportation,  its  officials 
show  industry  and  efficiency,  but  the  administration  of  the 


OPERATING  REVENUES  123 

department  does  not  disclose  a  masterful  appreciation 
of  the  meaning  of  tariff  schedules,  whether  such  schedules 
be  judged  from  the  social,  the  industrial,  or  the  invest- 
ment point  of  view.  This  is  no  personal  criticism  of 
traffic  officials.  The  work  of  every  man  is  largely  con- 
trolled (in  railwa}^  traffic  matters  absolutely  controlled) 
by  the  legal  and  competitive  conditions  that  surround  the 
business  for  which  he  works.  The  indifference  of  traffic 
officials,  and  the  relatively  inferior  grade  of  commercial 
intelligence  commonly  secured  for  service  in  the  Traffic 
Department,  is  explained  by  the  fact,  that  current  ad- 
ministrative and  judicial  opinion  looks  upon  the  determina- 
tion of  a  reasonable  rate  as  a  function  of  operating  ex- 
penses. So  long  as  cost  accounting  is  assumed  to  be  the 
last  word  in  a  rate  controversy,  little  or  no  use  will  be 
made  of  the  more  signfficant  information  that  might  be 
drawn  from  a  scientific  analysis  of  operating  revenues. 
It  is  the  erroneous  interpretation  given  to  Smyth  v,  Ames 
that  is  responsible  for  the  arrested  development  of  the 
standard  classification  of  operating  revenues. 

The  present  situation  is  most  unfortunate.  Not  only 
is  it  impossible  to  compute  the  specific  cost  of  a  specific 
service,  but  this  dogma  that  the  cost  of  service  is  the 
measure  of  the  proper  rates,  precludes  the  consideration 
of  the  role  played  by  inland  transportation  in  the  social 
and  industrial  world.  The  fundamental  criticism  here 
submitted  is  the  fact  that  the  relation  of  railway  rate 
schedules  to  the  industrial  development  of  the  nation  finds 
no  place  in  the  cost  theory  of  rates.  The  problem  thus 
raised  can  not  be  discussed  in  a  treatise  confined  to  railway 
accounting.  It  is  referred  to  merely  as  a  means  of  ex- 
plaining why  the  classification  of  operating  revenues  fails 


124    AMERICAN  RAILWAY  ACCOUNTING 

to  show  the  influence  of  tariff  discussion.  As  soon  as  the 
cost  theory  of  reasonable  rates  shall  have  proven  its 
futility,  this  revenue  classification  will  again  be  taken  up. 
It  will  be  rewritten  so  as  to  provide  for  a  comparison  of 
the  sources  from  which  revenues  accrue,  an  analysis  of 
the  services  on  which  they  accrue,  as  well  as  a  study  of 
the  social,  industrial,  and  even  political  results  for  which 
railway  tariffs  are  responsible.  This  revision  of  the  rev- 
enue classification  will  take  place,  when  it  is  recognized 
that  the  key  to  the  problem  of  specialized  railway  tariffs 
is  to  be  found  in  the  scientific  classification  of  operating 
revenues.  The  classification  of  operating  expenses  will 
then  take  its  place  as  an  analysis  designed  for  the  in- 
formation of  operating  officials,  while  the  classification 
of  operating  revenues  will  become  the  analysis  specially 
designed  for  the  use  of  traffic  officials  and  Railway  Com- 
missions when  dealing  with  rate  questions. 

It  is  evident  from  what  has  been  said  that  a  satisfactory 
classification  of  operating  revenues  can  only  be  worked 
out  under  the  guidance  of  a  satisfactory  program  of  rail- 
way tariffs.  The  field  of  investigation  as  preparatory  to 
such  a  classification  may,  however,  be  clearly  discerned. 
It  will  be  remembered  that  freight  revenue  and  passenger 
revenue  are  each  given  a  single  primary  account,  although 
together  their  two  accounts  carry  93%  of  the  total  op- 
erating revenue.  Such  an  adjustment  might  be  proper  if 
the  services  on  which  freight  revenue  and  passenger  rev- 
enue respectively  accrue,  were  homogeneous  in  character. 
This,  however,  is  not  the  case.  Freight  revenue,  for  ex- 
ample, covers  an  indefinite  number  of  different  commod- 
ities, carried  under  many  different  conditions,  and  holding 
many  different  relations  to  the  Ufe  of  the  community  and 


OPERATING  REVENUES  125 

the  development  of  industry.  Passenger  revenues,  also, 
although  apparently  simple  in  character,  do  in  fact  cover 
different  kinds  of  service  for  which  different  prices  are 
charged,  and  which  are  followed  by  essentially  different 
social  and  business  results.  The  forerunner  of  a  classifi- 
cation of  operating  revenues,  so  formed  as  to  meet  the 
requirements  of  the  Traffic  department,  is  an  intelUgent 
analysis  of  freight  and  passenger  traffic.  It  involves,  pos- 
sibly, the  rebuilding  of  the  traffic  structure,  beginning  with 
the  Freight  Classification. 


CHAPTER  VII 
THE  INCOME  ACCOUNT 

The  first  group  of  accounts  in  a  comprehensive  account- 
ing system  pertains  to  the  construction  of  the  property; 
the  second  group  covers  the  operations  of  the  property; 
the  third  group,  which  stands  for  all  that  remains  of 
accounting  records,  includes  the  income  account;  the 
profit  and  loss  account,  and  the  general  balance  sheet.  It 
is  the  purpose  of  these  accounts  to  show  both  the  current 
and  accumulated  loss  or  gain  resulting  from  the  business 
activities  of  the  corporation  whose  transactions  are  under 
review,  and  to  disclose  the  facts  by  which  those  results 
may  be  explained.  The  present  chapter  undertakes  an 
analysis  of  the  income  account. 

§  39.  Definition  of  the  Income  Account. — The  income 
account,  as  that  phrase  is  used  by  American  railway 
accountants,  covers  a  statement  of  credit  and  debit  items 
designed  to  show  the  surplus  or  deficit  arising  out  of  the 
transactions  of  a  definite  fiscal  period.  The  fiscal  period 
selected,  whether  a  month,  a  half  year,  or  a  year,  marks 
the  boundaries  of  the  income  statement,  and  too  great 
emphasis  can  not  be  placed  on  their  strict  observance. 
To  include  in  the  income  statement  an  entry  which  stands 
for  a  transaction  outside  of  the  period  selected,  is  an 
accoimting  misdemeanor.  It  is  this  conception  of  a  time 
limit  that  suggests  the  formal  separation  of  the  income 
statement  from  the  profit  and  loss  statement,  and  that 
marks   the   significant   difference   between   the   income 


THE  INCOME  ACCOUNT  127 

surplus  and  the  balance  sheet  surplus.  The  income  state- 
ment stands  for  a  definite  period;  the  profit  and  loss  state- 
ment disregards  all  periods;  the  balance  sheet  balance 
covers  the  entire  life  of  the  business. 

Another  consideration  besides  that  of  the  fiscal  period 
must  be  held  in  mind  in  order  to  appreciate  the  character 
of  the  income  statement.  This  is  the  conception  of  a 
personalized  business  interest  without  which  it  is  impos- 
sible to  trace  clearly  the  line  that  separates  income  en- 
tries from  operating  entries.  In  the  case  of  a  partnership, 
or  of  certain  kinds  of  incorporated  concerns,  the  operating 
responsibility  and  the  financial  responsibility  are  assumed 
by  the  same  individual  or  set  of  individuals;  but  the  devel- 
opment of  corporate  organization  for  the  management  o'f 
great  industries,  has  effected  a  well  recognized  separation 
between  these  two  functions.  The  income  statement  is 
primarily  for  the  use  of  the  corporate  management.  Its 
purpose  is  to  show  the  amount  at  the  disposal  of  the  Board 
of  Directors,  and,  according  to  the  practice  of  American 
railways,  to  show,  in  part,  what  disposition  has  been  made 
of  that  amount  by  the  Board.  The  income  statement 
may  be  regarded  as  the  corporation  statement,  in  the 
same  sense  that  the  revenue  statement  is  the  operating 
statement,  the  corporation  being  regarded  as  an  or- 
ganization which  stands  for  a  distinct  business  per- 
sonality. 

§  40.  Form  of  Income  Statement. — The  phraseology 
observed  by  the  form  of  income  statement  promulgated 
by  the  Interstate  Commerce  Commission,  makes  clear 
the  purpose  described  above.  The  statement  may  be 
said  to  begin  with  the  *'  Net  revenue  from  railway  opera- 
tions'* which  is  taken  over  from  the  operating  accounts. 


128     AMERICAN  RAILWAY  ACCOUNTING 

From  this  is  deducted  "Railway  tax  accruals/'  and  the 
remainder  is  called  "Railway  operating  income."  The 
point  to  be  noted  is  the  transition  from  operating  revenue 
to  operating  income.  This,  of  course,  is  an  arbitrary  use 
of  terms,  but  a  developing  science  has  the  right,  within 
reasonable  limits,  to  determine  its  own  nomenclature. 
With  this  transition  the  responsibility  of  officials  as  op- 
erators of  the  property  ceases,  and  that  of  the  Board  of 
Directors,  representing  the  de  facto  owners  of  the  property, 
is  forced  into  prominence.  Revenue  is  an  operating  word; 
income  is  an  ownership  word.  The  fact  that  the  corpora- 
tion is  a  legal  rather  than  a  natural  person  does  not  dim 
this  distinction  as  an  accounting  distinction. 

To  the  operating  income  there  is  next  added  the  in- 
come which  accrues  to  the  corporation  by  virtue  of  its 
ownership  of,  or  interest  in,  productive  properties  which 
it  does  not  operate,  or  of  its  being  the  beneficiary  of  run- 
ning contracts  or  agreements.  The  sum  of  these  several 
items  constitutes  the  "gross  income  (or  loss)."  It  is  quite 
in  harmony  with  the  idea  of  business  personality  that 
stands  back  of  the  income  statement  that  this  figure 
should  be  called  the  gross  corporate  income. 

From  the  gross  corporate  income  there  is  next  deducted 
the  liabilities  which  have  accrued  during  the  fiscal  period 
against  the  corporation,  because  of  its  use  of  property  not 
owned,  or  because  of  running  contracts  or  agreements 
respecting  which  the  corporation  sustains  the  part  of  a 
debtor.  The  remainder  is  the  "Net  income  (or  loss),"  or, 
to  speak  more  technically,  the  net  corporate  income. 
It  is  this  figure  that  measures  the  amount  placed  at  the 
disposal  of  the  Board  of  Directors  by  the  operating  and 
contractual  transaction  of  the  fiscal  period  covered  by 


THE  INCOME  ACCOUNT 


12^ 


the  income  statement.  The  primar}^  accounts  covering 
this  statement  will  be  found  in  Appendix  C. 

The  purpose  of  assembUng  the  balances  of  the  various 
accounts  that  make  up  the  income  statement,  is  to  arrive 
at  a  true  statement  of  net  corporate  income.  All  income 
accounting  rules  are  designed  for  the  protection  of  the 
integrity  of  this  figure. 

Immediately  following  is  a  bookkeeping  form  of  an 
income  statement,  so  drawn  as  to  make  provision  for 
either  a  surplus  or  a  deficit  balance.  It  will  serve  to  make 
clear  the  foregoing  explanations. 

Income  Statement 


Credits 

Amounts 

Debits 

Amounts 

Operating  income 

Operating  loss 

(less  taxes) 

(plus  taxes) 

Income  from  securi- 

Interest on  funded 

ties  owned 

debt 

Profit  on  industrial 

Interest  on  current 

investment 

debt 

Profit  on  security 

Contractual  dividends 

investment 

Rents  receivable 

Loss  on  industrial 
investments 

Release  of  premiums 

Loss  on  security 

on  funded  debt 

investments 

Other  income  credits 

Amortization  of 

discounts 
Rents  payable 
Other  income  debits 

Total  debits 

Total  credits 

Balance  (deficit) 

Balance  (surplus) 
Total 

Total 

130     AMERICAN  RAILWAY  ACCOUNTING 

§  41.  Treatment  of  Taxes.— The  treatment  accorded 
taxes  in  the  standardized  accounts  was  stated  above. 
They  are  made  an  independent  deduction  from  net  op- 
erating revenue,  the  remainder  being  called  operating  in- 
come. The  operating  officers  are  responsible  for  operating 
expenses,  and  the  financial  management  is  responsible 
for  contractual  expenditures;  but  responsibility  for  the 
amount  paid  by  a  railway  in  taxes  rests  with  the  govern- 
ment. In  this  fact  is  found  a  formal  reason  for  excluding 
taxes  from  both  operating  expenses  and  fixed  charges. 
To  include  them  would  tend  to  weaken  that  sense  of 
responsibility  essential  for  efliciency  in  management  or 
economy  in  administration. 

The  chief  controversy  on  this  point  is  with  those  who 
claim  that  taxes  ought  to  be  classed  as  an  operating  ex- 
pense. Taxes,  it  is  urged,  are  an  expense  to  the  railway 
and  should  be  included  with  other  items  in  the  measure- 
ment of  the  direct  cost  of  earning  revenue.  This  con- 
sideration is  of  peculiar  importance  in  the  United  States, 
in  view  of  the  current  theory  for  the  determination  of 
just  and  reasonable  passenger  and  freight  rates.  Ac- 
cording to  that  theory,  high  operating  costs  may  be  urged 
as  a  defense  of  established  rates  and  as  an  argument 
against  rate  reductions.  The  error  of  this  line  of  rea- 
soning lies  in  the  assumption  that  operating  expenses 
cover  all  elements  of  cost  in  rendering  a  transportation 
service.  An  analysis  of  the  true  cost  of  earning  revenue 
makes  it  evident  that  interest  charges,  rents,  and  other 
similar  items,  should  be  included,  as  well  as  taxes  and 
operating  expenses,  in  order  to  arrive  at  the  total  outlay 
incident  to  railway  service.  There  is  no  danger  that  the 
items  covered  by  direct  transportation  costs  will  be  mis- 


THE  INCOME  ACCOUNT  ISl 

understood  because  they  fail  to  cover  the  amounts  paid 
as  taxes. 

The  reason  why  taxes  are  grouped  by  themselves,  and 
made  a  deduction  from  net  operating  revenue,  before 
arriving  at  operating  income,  is  primarily  statistical.  It 
is  a  fundamental  principle  of  statistical  classification 
that  only  those  elements  or  items  should  be  grouped  which 
possess  the  same  trend,  or  which  show  the  same  tendencies. 
Transportation  by  rail  is  subject  to  the  law  of  ''increasing 
returns";  that  is  to  say,  each  increment  of  traffic  is  added 
at  a  relatively  reduced  cost  per  traffic  unit.  This  means, 
other  factors  remaining  constant,  that  an  increase  in 
traffic  will  not  be  followed  by  a  corresponding  increase 
in  operating  expenses;  and,  consequently,  that  net  rev- 
enues tend  to  increase  at  a  more  rapid  rate  than  gross 
revenues.  The  cost  per  unit  of  service  rendered  falls  with 
the  rise  in  the  number  of  units.  This  is  the  fundamental 
law  of  railway  operations.  Upon  it  rest  the  economics  of 
transportation. 

The  relation  between  taxes  and  traflSc,  or  between  taxes 
and  gross  revenue,  on  the  other  hand,  is  quite  the  reverse. 
The  fact  at  the  present  time  is  (whether  or  not  this  is  a 
social  law  may  be  left  for  others  to  discuss),  that  taxes 
tend  to  increase  more  rapidly  than  gross  revenues.  Were 
taxes  and  operating  expenses  to  be  grouped  under  a 
single  heading,  the  result  would  be  that  two  elements  of 
divergent  tendencies  would  be  united,  and  the  statistical 
statements  recorded  from  year  to  year  would  fail  to  meas- 
ure truthfully  the  tendency  of  either  element.  In  this 
fact  is  found  the  reason  for  excluding  taxes  from  operating 
expenses,  and  for  bringing  them  into  the  accounts  as  an 
independent  entry. 


132     AMERICAN  RAILWAY  ACCOUNTING 

§42.  Treatment  of  Rents. — For  the  most  part,  the 
items  in  the  above  income  statement  explain  themselves, 
and,  provided  the  entries  are  strictly  confined  to  accruals 
during  the  period  which  the  statement  covers,  no  difficulty 
will  be  encountered.  The  question  of  rents,  however,  is 
not  altogether  a  simple  question;  at  least,  it  seems  to  have 
been  the  occasion  of  considerable  embarrassment  to  rail- 
way accountants.  In  the  first  place,  they  do  not  readily 
undertake  the  separation  of  formal  rent  into  pure  rent, 
and  the  repayment  of  expenses  incurred  by  the  lessee  for 
the  interest  of  the  lessor,  so  as  to  carry  the  former  to  the 
income  account  and  the  latter  to  the  operating  accounts. 
In  the  second  place,  it  seems  to  be  the  incUnation  of  rail- 
way accountants  to  dispose  of  rentals  paid  by  charges  to 
operating  expenses,  and  of  rentals  received  by  credits  to 
income.  There  is  no  justification  for  such  a  distinction. 
The  accounting  rule  is  clear.  The  amounts  paid  as  pure 
rent  for  the  lease  of  the  property,  as  well  as  the  amounts 
received  for  property  leased,  should  be  covered  by  income 
account  entries. 

The  propriety  of  the  above  rule  will  be  readily  con- 
ceded, when  it  is  recognized  that  a  rental  payment  is  the 
same  in  kind  as  an  interest  payment.  Both  are  payments 
which  stand  for  the  earnings  of  property,  and  for  prop- 
erty owned  by  investors  who  assume  none  of  the  risks  of 
operation.  The  interest  is  paid  directly  to  the  holders  of 
the  obligation  incurred  by  the  operating  corporation,  but 
the  corporation  owns  the  property.  The  rent  is  paid  to  the 
owner  of  the  leased  property  placed  in  the  hands  of  the 
operating  corporation  for  its  use  and  benefit.  In  both 
cases,  the  personal  investors  receive  a  return  on  their 
investments.    The  fact  that  the  lessor,  in  railway  combi- 


THE  INCOME  ACCOUNT  133 

nations,  may  be,  and  usually  is,  a  subsidiary  non-operating 
corporation,  does  not  alter  this  statement;  the  only  dif- 
ference being  that  in  such  a  case,  the  subsidiary  corpora- 
tion, which  holds  the  title  to  the  leased  property,  stands 
between  the  operating  company  and  the  bondholders 
who  are  the  real  investors.  This  intermediary  corpora- 
tion receives  pa3maent  for  the  use  of  property  leased  in 
the  form  of  rent,  and  distributes  the  rental  received  in  the 
form  of  interest.  For  the  same  reason,  therefore,  that  in- 
terest on  bonds  is  charged  to  the  income  account,  rents  paid 
for  the  use  of  property  not  owned  should  be  so  charged. 

Everything  in  the  nature  of  a  rental  received,  or  a  rental 
paid,  should  be  carried  by  the  income  account.  The 
standard  system  of  accounts  prescribed  for  American 
railways,  however,  fails  to  make  a  strict  appUcation  of 
this  rule.  Attention  was  called  in  the  foregoing  chapter 
to  the  fact  that  the  classification  of  operating  revenues 
provides  a  primary  account  for  "Rents  of  buildings  and 
other  property."  This  deviation  from  strict  rule  was 
explained  by  the  statement  that,  if  properly  applied,  the 
margin  of  error  resulting  from  such  a  practice  is  so  narrow 
that  its  elimination  is  not  worth  the  cost. 

Not  all  rental  transactions,  however  can  be  treated  in 
this  cavaher  manner.  Current  practice  in  the  use  of  prop- 
erty owned  by  independent  corporations,  discloses  four 
conditions,  each  of  which  gives  rise  to  a  peculiar  phase  of 
the  rental  problem.    These  conditions  are  suggested  by: 


covering  exclusive  use  of  property, 
Leases  covering  partial  use  of  property, 
Interchange  of  freight  cars,  and 
Joint  facility  rents. 

Each  of  these  will  receive  separate  consideration. 


134     AMERICAN  RAILWAY  ACCOUNTING 

Leases  Covering  Exclusive  Use  of  the  Property.  For  the 
purpose  of  exact  accounting,  a  distinction  should  be  made 
between  an  exclusive  lease  and  a  lease  which  grants  partial 
or  joint  use  of  the  property.  In  the  case  of  an  exclusive 
lease,  the  corporation  that  owns  the  property  has  no  inter- 
est in  its  operation,  and  is,  therefore,  excused  from  the 
necessity  of  keeping  any  kind  of  operating  records.  Under 
such  conditions,  the  chief  function  of  a  lessor  corporation 
is  to  receive  money  as  rent  and  to  distribute  it  in  the  form 
of  interest  or  dividends.  For  this  purpose  it  is  only  neces- 
sary for  the  accountant  of  such  a  corporation  to  keep 
what  is  technically  known  as  financial  records.  The 
statistical  report  on  railways  in  the  United  States  for  the 
fiscal  year  1914  contains  a  list  of  703  "Subsidiary  non- 
operating"  companies,  which,  for  all  practical  purposes, 
are  merged  into  operating  systems  by  means  of  leases 
that  confer  upon  the  lessee  the  right  of  exclusive  and  con- 
tinuous use  of  the  property. 

Since  most  exclusive  leases  stand  for  independent  prop- 
erties, and  since  the  process  of  system  building  for  which 
they  are  used  has  extended  over  long  periods  of  time,  and 
has  called  into  exercise  the  judgment  of  large  numbers  of 
men,  it  will  occasion  no  surprise  to  learn  that  the  terms 
of  such  leases  are  as  various  as  the  whims  of  the  contract- 
ing parties.  The  lease  may  call  for  the  payment  of  taxes 
by  the  lessee,  or  it  may  not.  The  rental  may  be  a  cash 
rental,  or  it  may  be  an  assumption  by  the  lessee  of  the 
interest  that  accrues  on  the  bonds,  or  a  guarantee  of  divi- 
dends on  the  stock,  issued  by  the  lessor.  The  amount  of 
rent  to  be  paid  may  be  contingent  upon  earnings,  and  in 
some  cases  this  quasi-partnership  between  the  lessee  and 
the  lessor  goes  so  far  as  to  hold  the  latter  responsible  for 


THE  INCOME  ACCOUNT  135 

all  or  a  part  of  an  operating  deficit.  Commonly,  the 
contract  makes  the  lessee  responsible  for  the  maintenance 
of  the  property  leased,  in  which  case  the  amount  named 
as  rent  is  pure  rent,  and  a  charge  to  income  to  its  full 
amount.  Should  it  occur,  however,  that  the  lessor  main- 
tains the  property,  a&  is  sometimes  the  case  when  a  large 
operating  company  leases  a  siding,  a  spur,  or  a  branch 
line  from  an  industrial  company,  the  amount  paid  as 
rent  must  be  reduced  by  the  cost  of  maintenance  before 
arriving  at  the  amount  of  pure  rent  properly  chargeable 
to  income. 

In  the  case  of  exclusive  leases,  it  is  not  uncommon  for 
the  contract  to  recite  that  the  lessee  shall  assume  the 
direct  payment  of  the  interest  that  accrues  on  the  out- 
standing bonds  of  the  lessor,  or  that  a  certain  dividend 
be  guaranteed  on  the  stock.  These  words  do  not  change 
the  character  of  the  payment.  On  the  books  of  the  lessee, 
such  interest  and  dividends  are  rent  and  should  be  so 
charged.  On  the  books  of  the  lessor,  also,  these  payments 
are  to  be  credited  as  rent  and  charged  out  as  interest  and 
dividends  paid. 

This  is  no  place  to  discuss  those  complex  inter-corporate 
relations  that  arise,  on  account  of  the  large  variety  of 
rental  contracts,  but  one  point  is  worthy  of  mentioning. 
Not  unfrequently  the  lessee  corporation  is  the  owner  of  a 
sufficient  number  of  the  securities  issued  by  the  lessor, 
to  ensure  either  direct  or  contingent  control;  and,  the 
rental  contract  being  executed,  the  securities  thus  owned 
are  used  as  collateral  for  the  issue  of  new  securities  by  the 
lessee.  In  some  cases,  three  or  four  layers  of  securities 
rest  on  the  same  physical  property,  and  each  transaction 
requires  a  credit  and  debit  entry  in  the  income  accounts 


136     AMERICAN  RAILWAY  ACCOUNTING 

of  the  various  corporations  concerned.  No  difficulty 
need  arise  on  account  of  this  duplication  of  entries,  so 
far  as  the  final  surplus  of  the  operating  corporation  is 
concerned;  but  it  is  necessary  to  exercise  great  care  if, 
for  any  reason,  it  is  desired  to  combine  the  income  ac- 
counts of  the  operating  and  subsidiary  companies  into  a 
single  statement.  For  this  purpose,  the  duplication  must 
be  eliminated,  a  task  that  can  only  be  accomplished 
through  an  accurate  and  detailed  knowledge  of  all  the 
financial  transactions  involved. 

The  significance  of  this  duplication  will  be  appreciated 
when  it  is  observed  that  the  total  outstanding  railway 
capital  of  American  railways  on  June  30th,  1914,  was 
$20,247,301,257,  of  which  the  net  amount  not  held  by 
railway  companies  was  $15,719,796,925.  Should  the 
former  amount  be  spread  on  a  mileage  basis,  the  amount 
per  mile  of  fine  would  be  $85,800,  whereas  the  true  amount 
of  outstanding  obHgations  per  mile  of  line  was  $66,600. 

Lease  Covering  Partial  Use  of  Property.  In  the  actual 
management  of  railways,  it  frequently  occurs  that  units 
of  property  covered  by  the  capital  expenditures  of  one 
line,  are  loaned  temporarily  to  another  line  to  be  used  by 
it  in  the  conduct  of  its  operations.  For  example,  a  locomo- 
tive, a  passenger  car  or  work  equipment,  may  be  hired 
out  at  so  much  per  day,  or  per  month,  or  on  some  other 
basis  corresponding  to  use.  Such  a  rental  agreement  is 
not  an  ''exclusive  lease,"  in  the  sense  in  which  that  phrase 
was  used  in  the  foregoing  paragraph.  There  is  no  thought 
of  making  use  of  such  rental  contracts  to  build  up  a 
permanent  operating  system  under  the  control  of  the 
lessee.  The  transaction  under  consideration  is  nothing 
more  than  a  temporary  loan  of  specific  units  of  property. 


THE  INCOME  ACCOUNT  187 

The  peculiar  accounting  significance  of  such  a  transac- 
tion arises  from  the  fact  that  the  lessor  commonly  assumes 
all  maintenance  and  replacement  expenses  incident  to  the 
property  temporarily  leased,  and  covers  the  original 
charges  for  such  expense  in  his  operating  expenses.  In 
this  case,  the  amount  received  as  rent  is  not  pure  rent;  it 
is  in  part  a  reimbursement  of  expenses  incurred. 

The  situation  outlined  gives  rise  to  two  accounting 
problems. 

First:  In  view  of  the  fact  that  the  lessor  assumes  an 
expense  caused  by  the  lessee  when  earning  its  revenue, 
how  is  it  possible  to  arrive  at  a  statement  of  the  direct 
cost  of  revenue  for  either  the  lessee  or  the  lessor?  One 
phase  of  this  question  was  discussed  in  Chapter  V,  in 
connection  with  the  several  joint  facilities  accounts  for 
which  the  classification  of  operating  expenses  makes  pro- 
vision. The  same  analysis,  and  theoretically  the  same 
conclusion,  may  be  appUed  to  property  hired  out  for 
temporary  use.  This,  however,  is  not  a  case  of  property 
jointly  used,  and  for  that  reason  a  different  accounting 
rule  is  applied.  According  to  the  rule  laid  down  in  the 
standard  system  of  railway  accounting,  the  lessor,  having 
determined  from  his  own  records  the  proportion  of  the 
gross  rent  apphcable  to  repairs  and  depreciation,  makes 
a  credit  of  these  amounts  to  the  operating  expense  accounts 
originally  charged,  and  the  amounts  thus  credited  will 
be  charged  to  the  corresponding  accounts  in  the  operating 
expense  accounts  of  the  lessee  line.  In  this  manner,  each 
line  will  arrive  at  the  direct  cost  of  its  revenues,  although 
neither  line  will  carry  in  its  primary  accounts,  the  amount 
of  money  actually  spent  by  the  responsible  officers.  The 
integrity  of  the  cost  of  revenue  is  maintained,  but  the 


138     AMERICAN  RAILWAY  ACCOUNTING 

figure  by  which  efRciency  is  to  be  tested  is  thrown  away. 
Had  the  joint  faciHty  rule  been  appHed,  both  figures  would 
have  been  preserved. 

Second:  The  second  question  is  closely  allied  to  the  one 
just  considered.  The  nominal  rent  for  property  tempora- 
rily leased  (for  example,  the  $10  per  day  paid  for  the  use 
of  a  locomotive),  covers  repairs  and  depreciation  in  addi- 
tion to  the  pure  rent.  Repairs  and  depreciation  are  op- 
erating charges,  while  pure  rent  is  an  income  charge. 
How  can  the  nominal  rental  be  segregated  so  as  to  assign 
to  each  account  its  proper  share?  The  rule  laid  down  for 
attaining  this  result  is  as  simple  as  it  is  arbitrary.  The 
primary  operating  records  are  accepted  as  the  basis  for 
determining  the  maintenance  costs;  the  remainder  of  the 
rental  payment  is  assumed  to  be  pure  rent.  The  primary 
operating  expense  accounts  of  the  lessor  are  credited  with 
a  proper  portion  of  the  amounts  originally  charged  for 
the  maintenance  of  the  property  leased,  this  portion  being 
determined  on  the  basis  of  use,  and  the  difference  between 
this  amount  and  the  amount  received  as  nominal  rent  is 
the  pure  rent  to  be  credited  to  the  income  account  against 
the  headings, 

Rent  for  locomotives. 

Rent  for  passenger  cars, 

Rent  for  floating  equipment,  and 

Rent  for  work  equipment. 

Inasmuch  as  the  accounts  of  the  lessor  and  lessee  are 
ultimately  to  be  combined  into  a  consolidated  statement 
by  the  Statistical  Division  of  the  Interstate  Commerce 
Commission,  it  is  essential  that  the  records  of  the  lessee 
should  show  the  converse  of  those  of  the  lessor.  To 
accomplish  this  result,  the  lessor  is  required  to  show  upon 


THE  INCOME  ACCOUNT  139 

the  bills  which  it  renders,  the  distribution  of  maintenance 
charges  to  the  primary  accounts,  and  the  distribution 
thus  shown  is  followed  by  the  lessee  in  making  correspond- 
ing charges  to  its  primary  maintenance  accounts.  What 
is  credited  to  a  primary  account  by  the  lessor  is  charged 
to  that  same  account  by  the  lessee. 

The  point  of  especial  importance  in  the  discussion,  how- 
ever, is  the  fact  that  it  is  essential  for  correct  accounting 
that  income  account  rentals  should  be  strictly  confined 
to  amounts  paid  as  compensation  for  the  use  of  invested 
capital. 

Interchange  of  Freight  Cars.  The  accounting  treat- 
ment of  freight  cars  interchanged  differs  from  that  out- 
lined in  the  foregoing  paragraph  which  pertains  to  the 
hire  of  locomotives,  passenger  cars,  floating  equipment, 
and  work  shop  equipment.  This  difference  consists  in  two 
things.  In  the  first  place,  the  original  entry  in  the  pri- 
mary accounts,  ''Hire  of  freight  cars — Credit  balance," 
and  "Hire  of  freight  cars — Debit  balance,"  carry  a  bal- 
anced and  not  a  gross  amount.  The  same  income  state- 
ment will  not  cover  a  credit  and  a  debit  entry  for  the 
interchange  of  freight  cars.  The  propriety  of  such  a  rule 
rests  upon  the  peculiar  practice  of  American  railways  with 
regard  to  the  use  of  freight  cars  for  interline  freight  traffic. 

Terminal  and  loading  expenses  are  a  considerable  por- 
tion of  the  cost  of  transportation.  In  order  to  reduce  this 
expense,  and  also  to  avoid  the  delay  incident  to  the  un- 
loading and  loading  of  freight,  when  freight  is  turned  over 
by  one  Une  to  another  line,  the  cars  of  the  several  com- 
panies interested  in  through  traffic  are  used  indiscrim- 
inately, and  adjustment  made  either  on  the  basis  of  a 
per  diem  or  a  per  mileage  payment.    A  significant  feature 


140    AMERICAN  RAILWAY  ACCOUNTING 

of  the  agreement  relative  to  the  interchange  of  freight 
cars  is  that  all  repairs,  outside  of  running  repairs,  and 
depreciation  charges,  are  borne  by  the  owning  company. 
This  results  in  a  charge  to  the  operating  expenses  of 
the  lessor  for  repairs  made  necessary  by  the  use  of 
the  cars  by  the  lessee;  from  which  it  follows  that  the 
per  diem  or  per  mileage  payment  is  in  part  a  repay- 
ment of  the  cost  of  repairs  and  of  the  charge  for  de- 
preciation. 

A  peculiar  difficulty  arises  in  the  separation  of  pure  rent 
from  nominal  rent  in  the  case  of  the  per  diem  or  per  mileage 
payment  for  the  use  of  foreign  cars.  In  most  cases  of 
rental  contracts,  the  nominal  rent  may  be  said  to  be  the 
sum  of  pure  rent  and  the  expenses  incurred  in  the  main- 
tenance of  the  property  leased,  and,  provided  one  of  these 
elements  can  be  determined,  the  remainder  may  be 
accepted  as  the  true  measure  of  the  other  element.  In 
the  case  of  interchanged  freight  cars,  however,  the  price 
fixed  is  in  fact  a  penalty  price,  and  on  that  account  bears 
no  necessary  relation  to  either  the  cost  of  repairs  or  the 
interest  on  capital  invested.  The  chief  purpose  of  the 
general  manager,  especially  when  the  commercial  con- 
ditions are  such  as  to  result  in  a  shortage  of  cars,  is  to 
secure  a  quick  return  of  the  cars  used  by  the  foreign  com- 
panies, and  this  he  does  by  imposing  a  high  per  diem  or  per 
mileage  charge  for  their  use.  A  charge  of  seventy-five  cents 
per  day  per  car,  for  example,  exceeds  the  average  daily  cost 
of  repairs  and  interest  on  the  money  invested  in  the  car, 
the  difference  being  the  penalty  which  the  using  company 
incurs,  should  the  retention  of  the  car  be  unduly  extended. 
This  penalty  charge,  it  may  be  said  in  passing,  has  a 
tendency  to  force  all  companies  to  provide  for  an  ample 


THE  INCOME  ACCOUNT  141 

number  of  freight  cars  out  of  their  own  capital,  rather 
than  to  rely  upon  the  capital  of  foreign  companies  for  cars 
used. 

So  far  as  the  income  accoimt  is  concerned,  however, 
it  is  not  necessary  to  distinguish  between  the  pure  rental 
element  and  the  penalty  element  of  the  rental  paid  for 
the  use  of  freight  cars.  Unless  there  is  some  reason  from 
the  manager^s  point  of  view  why  they  should  be  separated, 
both  items  may  be  carried,  either  as  a  net  debit  or  a  net 
credit,  to  the  "Hire  of  Freight  Cars.'^  It  is,  of  course, 
understood  that  the  maintenance  charges  are  taken  out 
of  the  per  diem  pajnnent  before  arriving  at  the  amount 
carried  to  the  income  account. 

Joint  Facility  Rents,  In  the  standard  system  of  rail- 
way accounts,  a  special  heading  is  provided  in  the  in- 
come classification  for  joint  facility  rents.  It  is  designed 
to  cover  the  pure  rental  feature  of  interline  settlements 
for  jointly  operated  or  jointly  used  property.  Tracks, 
yards,  terminals,  signals,  and  many  other  kinds  of  prop- 
erty owned  by  one  line,  may  be  jointly  used  by  two  or 
more  lines,  and  leases  to  cover  such  use  are  usually  drawn 
so  as  to  distribute  to  the  joint  lines  the  expense  incurred 
for  the  maintenance  and  operation  of  the  property  in 
proportion  to  the  use  made  by  each  line  of  the  property 
jointly  used.  The  situation  is  not  at  all  different  from  that 
discussed  above,  so  far  as  the  pure  rent  involved  in  the 
payment  is  concerned.  The  rule  laid  down  for  the  guidance 
of  accountants  is  as  follows: 

When  the  compensation  for  the  use  of  joint  facilities  is  a  fixed 
amount  or  is  based  upon  a  charge  for  passenger,  ton,  car,  or 
other  unit,  it  shall  be  jointly  apportioned  between  this  account 
(that  is  the  "Joint  FaciUty  Rents"  in  the  income  accounts) 


142    AMERICAN  RAILWAY  ACCOUNTING 

and  the  appropriate  joint  facility  operating  expense  accounts. 
This  apportionment  shall  be  made  by  the  operating  company 
and  shall  be  followed  by  the  accounting  company. 

§  43.  Other  Income  Credits. — Other  forms  of  income 
accrue  from  the  ownership  of  property  besides  that  covered 
by  rental  leases.  These  may  be  mentioned  in  the  order 
in  which  they  appear  in  the  authorized  classification  of 
the  income  accounts. 

The  most  important  of  this  list  is  the  net  credit  balance 
that  accrues  from  the  operation  of  a  property  owned  by  a 
railway  in  its  corporate  capacity,  but  whose  operations  are 
entirely  distinct  from  that  of  the  property  assigned  for 
transportation.  The  property  concerned  is  listed  with  rail- 
way assets  and  carried  on  the  balance  sheet  as  ''Miscella- 
neous physical  property."  It  covers  such  property  as 
mines,  timber  lands,  commercial  power  plants,  lands  and 
buildings  not  used  for  transportation  whatever  the  pur- 
pose for  which  they  are  held,  sawmills,  and  other  manu- 
facturing plants.  These  properties  should  not  be  confused 
with  properties  like  ice  plants,  gas  plants,  and  others  of 
the  same  class,  whose  operations  are  undertaken  as  a 
part  of  the  service  of  moving  passengers  and  freight.  The 
operations  of  such  properties  are  covered  by  the  operating 
accounts.  By  contrast,  the  properties  under  considera- 
tion are  owned  primarily  for  the  profit  they  can  give, 
their  operation  is  outside  of  the  service  of  transporta- 
tion, and  the  investment  which  they  represent  is  an  in- 
vestment of  corporation  capital;  all  of  which  shows  the 
propriety  of  recording  the  net  profit  that  they  produce 
as  an  income  credit.  Extensive  investments  of  this  class 
may  call  in  question  the  wisdom  of  the  financial  policy 
responsible  for  them,  but  if  railway  capital  has  been  used 


THE  INCOME  ACCOUNT  143 

for  non-railway  investments,  the  accountant  must  adjust 
his  records  accordingly. 

Another  occasion  for  the  recognition  of  profits  as  an 
income  credit  arises  from  the  investment  of  railway  capital 
in  outside  companies  engaged  in  some  special  commercial 
enterprises.  The  significant  point  is  that  the  railway 
stands  as  a  partner,  or  proprietory  investor,  in  a  company 
that  maintains  a  separate  business  or  a  separate  cor- 
porate existence.  In  this  case,  it  is  the  final  profit  that 
is  credited  to  the  income  account,  and  not,  as  in  the  case 
above,  a  "net  credit  balance  of  the  non-operating  reve- 
nues or  income.'^  Where  a  railway,  in  its  corporate  ca- 
pacity holds  the  securities  of  an  independent  corporation, 
whether  such  a  corporation  is  engaged  in  transportation 
or  in  some  general  commercial  enterprise,  its  income  ac- 
count should  accept  the  dividends  declared,  or  the  interest 
that  accrues,  on  such  investments. 

It  is  necessary  to  note  in  this  connection  that  the  stand- 
ardized accounting  rules  for  American  railways  limit  the 
credits  for  this  class  of  transactions  to  dividends  and  inter- 
est actually  "collected,"  unless  their  payment  is  reason- 
ably assured  by  past  experience,  or  by  some  form  of  guaran- 
tee. This  is  doubtless  good  sense  when  one  considers 
the  general  result;  but  it  is  a  departure  from  strict  account- 
ing. This  is  equivalent  to  writing  a  bad  debt  out  of  the 
accounts  by  not  writing  it  in;  a  procedure  that  imposes 
upon  the  accountant  a  responsibility  which  he  should  not 
be  called  upon  to  bear.  It  should  also  be  recognized  that, 
being  clothed  with  this  power  of  exercising  personal  judg- 
ment as  to  what  should  and  what  should  not  be  included 
in  the  accounting  record,  he  is  in  no  position  to  resist  the 
management  or  Wall  street,  should  that  interest  submit 


144    AMERICAN  RAILWAY  ACCOUNTING 

improper  suggestions.  It  is  a  sound  rule  which  requires 
that  all  real  transactions  should  be  covered  by  the  ac- 
counting record,  and  the  accrual  of  interest  on  a  bad 
debt  as  long  as  it  remains  unadjusted,  is  a  real  trans- 
action as  much  as  the  accrual  of  interest  on  a  good  debt. 
A  margin  of  judgment  for  the  accountant,  if  allowed  at 
all,  should  be  very  carefully  guarded. 

The  rules  further  provide  that,  in  case  securities  which 
bear  a  date  for  maturity  are  bought  at  either  a  premium 
or  discount,  the  amount  of  such  divergence  from  par  may 
be  spread  over  the  years  intervening  between  the  date 
of  acquisition  and  the  date  of  maturity,  and  carried  as  a 
credit  or  a  debit  to  the  primary  account  "Income  from 
funded  securities."  This  means  that  the  profit  or  loss 
on  investments  in  securities  are  to  be  taken  into  the  ac- 
counts annually,  rather  than  to  wait  until  the  transaction 
has  matured  and  then  carry  it  through  the  accounts  as  a 
lump  sum.  The  significant  accounting  feature  of  the  rule 
is  that  ''amounts  thus  credited  or  charged  shall  be  con- 
currently charged  or  credited  to  the  account  in  which  the 
cost  of  the  securities  is  carried." 

The  last  class  of  income  credits  cover  what  may  be 
termed  the  company's  claim  on  the  company's  revenues. 
This  income  is  not  a  true  income  in  the  sense  that  it  in- 
creases the  final  surplus  of  the  company.  It  may,  how- 
ever, affect  the  standing  of  the  stockholder's  equity  in  a 
very  marked  degree.  It  stands  rather  for  a  claim  that 
one  interest  has  as  against  other  interests,  both  of  which 
pertain  to  the  same  business  or  corporation.  It  may 
spring  from  a  legal  obligation,  or  the  obligation  on  which 
it  rests  may  be  an  accounting  obligation,  but  in  neither 
case  can  the  obligation  be  ignored.    An  income  that  ac- 


THE  INCOME  ACCOUNT  145 

crues  from  previous  sinking  fund  investments,  or  the 
credit  that  must  be  allowed  for  the  release  of  premium  on 
funded  debts,  are  cases  in  hand. 

§44.  Income  Debits. — A  consideration  of  income 
debits  is,  to  a  large  extent,  the  converse  of  what  has  al- 
ready been  submitted  in  the  analysis  of  income  credits. 
As  the  latter  stand  for  the  contractual  or  corporation  re- 
ceipts, so  the  former  stand  for  the  contractual  or  corpora- 
tion expenditures.  Income  debits  cover  all  deductions 
from  the  gross  income  of  the  corporation  before  arriving  at 
the  net  surplus  or  deficit  resulting  from  the  operating  and 
financial  transactions  of  the  year  or  fiscal  period  under 
consideration.  The  large  item  is  interest  on  funded  debt, 
and  so  long  as  railways  continue  to  be  private  enterprises, 
this  item  will  be  a  permanent  and  probably  a  constantly 
growing  item.  A  government  owned  railway  might  hold 
it  to  be  a  wise  policy  to  redeem  outstanding  obligations 
in  order  to  extinguish  the  annual  interest.  The  real  owners 
of  the  property,  the  people,  could  than  reap  a  dividend 
(or  the  equivalent  of  a  dividend)  m  a  reduction  of  passen- 
ger and  freight  charges.  But  a  private  corporation  has 
no  adequate  motive  for  extinguishing  its  debt.  According 
to  the  1914  report  on  the  operation  of  American  railways, 
''Interest  deductions  for  funded  debt"  amount  to  $375,- 
296,354  out  of  a  total  of  "Gross  Income"  of  $912,908,927. 

Rents  paid  for  lease  of  property  stand  next  in  order  of 
importance  among  income  deductions.  This  item  ac- 
counts for  $122,592,248  out  of  the  total  of  gross  income 
named  above.  The  income  account  from  which  these 
figures  are  taken  makes  no  attempt  to  eUminate  duphca- 
tions  that  arise  because  of  intercorporate  transactions. 
The  leases  that  are  the  occasion  of  this  payment  are,  for 


146     AMERICAN  RAILWAY  ACCOUNTING 

the  most  part,  long  term  or  perpetual  leases,  and  are 
entered  into  by  the  lessee  in  order  to  build  up  an  operating 
system  and  render  it  stable  as  an  organized  business  unit. 
In  most  cases,  also,  the  lessee  assumes  the  responsibility 
for  the  maintenance  of  the  property,  and,  consequently, 
the  amount  paid  under  the  agreement  is  a  pure  rent  and 
should  be  charged  in  full  to  the  income  account.  Should 
the  agreement  impose  upon  the  lessor  any  responsibility 
that  incurs  an  operating  expense,  the  normal  rent  should 
be  analyzed  and  the  charges  made  under  the  rules  already 
considered  in  connection  with  rental  credits. 

Another  debit  entry  for  which  the  standard  income 
account  makes  provision  pertains  to  the  expenses  of  or- 
ganization or  administration  of  lessor  companies  whose 
property  is  carried  into  the  operating  system  by  lease,  con- 
tract, or  agreement.  Even  the  lessor  companies,  so  long 
as  they  maintain  an  active  legal  existence,  are  obliged  to 
incur  certain  expenses  such  as  advertising  annual  re- 
ports, issuing  calls  for  Directors'  meetings,  publishing 
notices  of  declaration  of  dividends,  and  the  like.  This 
class  of  expenses  must  be  deducted  from  the  rent  re- 
ceived under  the  lease,  before  settlement  can  be  made 
with  the  stockholders  or  bondholders  of  the  subsidiary 
company.  In  some  cases,  the  contract  provides  that 
the  lessee  shall  meet  the  organization  expenses  of  the 
lessor,  in  which  case  this  expense  comes  to  be  an  item 
in  the  rental  payment.  This  group  of  expenses  should  be 
clearly  distinguished  from  the  organization  and  adminis- 
tration expenses  incurred  by  the  operating  railways.  Such 
expenses  are  made  a  specific  charge  to  operating  expenses. 

Amortization  of  discounts  is  another  charge  for  which 
the  debit  side  of  the  income  makes  provision.    The  text 


THE  INCOME  ACCOUNT  147 

descriptive  of  this  primary  account  provides  that  it  ''shall 
be  charged  during  each  fiscal  period  with  a  proportion  of 
the  discount  and  expense  on  funded  debt  obligations 
applicable  to  that  period.'^  The  situation  may  be  easily 
explained.  In  case  a  fifty  year  bond  is  sold  at  20%  dis- 
count, the  corporation  making  such  a  sale  agrees  to  repay 
the  principal  of  the  bond  at  maturity.  It  is  a  generally 
accepted  rule  that  amortization  of  discount  should  be 
spread  over  the  life  of  the  bond  [this  treatise  says  the 
operating  life  of  the  bond]  and  thus  obviate  the  necessity 
of  an  extraordinary  payment  when  the  bond  is  redeemed. 
The  rule  laid  down  in  the  standard  system  of  accounts 
requires  that  "a  charge  to  this  account  for  any  period 
must  not  be  either  greater  or  less  than  the  proportion  of 
the  balance  remaining  unamortized  applicable  to  that 
period."  This  means  that  the  revenues  of  any  period 
cannot  be  burdened  with  a  charge  for  the  amortization 
of  discounts  in  excess  of  the  amount  which  pertains  to 
that  period,  according  to  the  rule  of  uniform  application. 
The  corporation  is  permitted,  however,  to  write  out  at 
any  time  a  discount  which  remains  unamortized  by  a 
direct  charge  to  profit  and  loss.  This  distinction  seems 
proper  inasmuch  as  a  charge  to  profit  and  loss  is,  in 
effect,  a  burden  upon  the  surplus  which  has  been  accumu- 
lated during  the  operating  life  of  the  property,  whereas  a 
charge  to  income  is  a  burden  imposed  on  the  revenues  of 
a  particular  period. 

The  treatment  of  appropriations,  which,  under  the 
standardized  rules  used  by  American  railways,  are  allowed 
to  pass  through  the  income  account  at  the  option  of  the 
accountant,  are  considered  in  the  chapter  that  follows. 


CHAPTER  VIII 
PROFIT  AND  LOSS  ACCOUNTS 

Considerable  latitude  in  accounting  methods  is  dis- 
closed by  a  study  of  the  manner  in  which  the  balance  of 
the  income  statement  is  carried  into  the  general  balance 
sheet.  This  arises  from  the  fact  that  some  systems  of 
accounting  provide  separate  statements  to  carry  aU  the 
appropriations  of  surplus,  whether  current  or  accumulated, 
while  other  systems  distribute  this  class  of  charges  be- 
tween the  income  accounts  as  deductions  from  current 
net  income,  and  as  debit  entries  in  the  profit  and  loss  ac- 
counts. The  system  of  accounting  prescribed  for  the  use 
of  American  railways  approves  the  latter  method,  and 
it  is  here  accepted  as  the  basis  of  critical  discussion. 

§  45.  Definition  of  Profit  and  Loss. — The  definition 
of  profit  and  loss  accounts  approved  by  the  Interstate 
Conmierce  Commission  is  as  follows: 

Profit  and  loss  accounts  are  those  designed  to  show  the  changes 
in  the  corporate  surplus  or  deficit  during  each  fiscal  period,  as 
affected  by  the  operations  and  business  transactions  during  that 
period,  by  any  disposition  of  net  profits  made  solely  at  the  option 
of  the  accounting  company,  by  accounting  adjustments  of  mat- 
ters not  properly  attributable  to  the  period,  or  by  miscellaneous 
gains  or  losses  not  provided  for  elsewhere;  and  to  show  also  the 
unappropriated  surplus  of  the  carrier  at  the  date  of  the  balance 
sheet. 

This  definition  as  it  stands,  involves  the  inconsistency 
of  making  appropriations  out  of  a  surplus  before  the  sur- 

148 


PROFIT  AND  LOSS  ACCOUNTS  149 

plus  is  known,  for  the  true  surplus  can  not  be  known  until 
after  allowance  is  made  for  debit  and  credit  profit  and 
loss  entries  exclusive  of  appropriations. 

It  may  be  answered  that  a  trial  statement  of  the  balance 
sheet  is  sufficient.  This  is  doubtless  true.  Almost  any 
system  of  records  can  be  worked  if  the  accountant  is 
careful.  That,  however,  does  not  excuse  the  continued 
use  of  an  unsatisfactory  statement.  One  mark  of  sound 
records  is,  that  all  congruous  items  should  be  treated  in  a 
single  statement.  It  should  not  be  necessary  to  look  in 
two  or  three  places  to  arrive  at  the  balance  that  measures 
some  single  homogeneous  fact. 

An  illustration  of  this  duplication  of  entry  may  be 
found  in  the  classification  covered  by  Appendix  C.  Five 
items  are  carried  by  the  income  account  as  disposition 
of  net  income,  which  are  repeated  in  the  list  of  debits 
in  the  profit  and  loss  accounts.  For  example,  under 
income,  primary  account  553  is  entitled  ''Dividend  ap- 
propriations of  income,"  while  under  profit  and  loss, 
primary  account  614  is  entitled  '' Dividend  appropria- 
tions of  surplus."  They  are  the  same  thing.  Why  should 
the  standard  form  of  a  financial  statement  be  disfigured  by 
this  duplication?  The  income  statement  ought  to  close 
with  a  balance  that  stands  for  "Net  income  (or  loss)." 
No  question  of  appropriation  ought  to  be  raised  until 
after  the  surplus  is  determined. 

The  accounting  problem  of  the  manner  in  which  appro- 
priations by  a  Board  of  Directors  should  be  treated  seems 
never  to  have  been  raised  by  railway  accountants  in  this 
country;  at  least,  it  has  never  received  the  attention  which 
it  deserves.  This  is  due  in  part  to  the  inclination  of  ac- 
countants to  make  use  of  comprehensive,  miscellaneous 


150     AMERICAN  RAILWAY  ACCOUNTING 

groups  of  entries  as  a  substitute  for  clear  cut  analysis; 
in  part  to  the  habit  of  Boards  of  Directors  to  declare  divi- 
dends "out  of  income"  or  "out  of  surplus"  without  any 
competent  reason  for  so  doing;  in  part  to  the  apparent 
inability  of  the  courts  to  distinguish  clearly  between  net 
revenues,  profits,  net  income,  and  accumulated  surplus. 
The  Interstate  Commerce  Commission's  system  of  pre- 
scribed accounts  reflects  this  uncertainty  of  analysis  with 
the  result  above  described. 

The  remedy  for  this  unnecessary  confusion  is  simple. 
All  entries  which  stand  for  appropriations  of  surplus 
should  be  collected  in  a  single  statement  entitled  surplus 
appropriation  accounts.  It  is  this  account  that  should 
acknowledge  as  a  credit  the  balance  of  profit  and  loss 
for  the  current  year,  and  the  free  surplus  carried  over 
from  the  previous  year,  from  which  should  be  deducted 
all  appropriations  made  on  the  authority  of  the  Board 
of  Directors,  the  remainder  being  the  balance  to  be  carried 
to  the  balance  sheet  of  the  current  year  as  an  unappro- 
priated surplus.  Under  this  treatment,  the  income  state- 
ment would  close  with  a  "net  corporate  surplus"  of  the 
year;  the  profit  and  loss  statement  would  close  with  the 
amount  of  surplus  contributed  by  the  current  year  to  the 
surplus  available  for  appropriation;  and  the  appropria- 
tion statement  would  close  with  the  amount  to  be  carried 
as  an  unappropriated  surplus  to  the  records  of  the  succeed- 
ing year.  There  are  quite  a  number  of  unsolved  account- 
ing problems  for  which  this  simple  adjustment  supplies  the 
key.  Certainly  the  disposition  made  by  a  Board  of  Di- 
rectors of  the  funds  placed  at  its  disposal,  is  of  sufficient  im- 
portance to  warrant  a  separate  and  specialized  statement. 

If  the  criticism  on  current  practice  thus  implied  be 


PROFIT  AND  LOSS  ACCOUNTS  151 

accepted  as  sound,  it  is  evident  that  the  definition  of 
profit  and  loss  accounts  quoted  above  is  too  comprehen- 
sive. It  fails  to  confine  these  accounts  to  the  peculiar 
function  that  they  should  serve.  The  following  definition, 
submitted  as  a  substitute  for  the  one  quoted  above,  is  in 
harmony  with  a  more  definite,  although  a  narrower,  con- 
ception of  the  transactions  to  be  covered  by  the  account- 
ing statement  under  consideration.  It  does  not,  however, 
attempt  to  realize  in  full  the  suggestions  submitted  above. 
In  conformity  with  the  standardized  rules  of  railway  ac- 
counting, it  treats  appropriations  as  profit  and  loss  debits. 
This  is  believed  to  be  an  unfortunate  adjustment.  Never- 
theless, it  is  workable,  and  permits  the  assembling  of  all  ap- 
propriations in  a  single  statement.  Moreover,  in  as  much 
as  it  begins  with  the  sum  of  the  current  income  balance 
and  the  balance  sheet  balance  of  the  previous  year,  it  does 
recognize  the  fundamental  truth  that  appropriations  of 
surplus  must  be  made  out  of  surplus. 

Profit  and  loss  accounts  may  be  defined  as  those  ac- 
counts which  deal  with  changes  in  the  current  surplus. 
They  cover  all  correction  entries,  and  all  entries  of  mis- 
cellaneous gains  or  losses  which  do  not  pertain  to  the 
period  covered  by  the  income  accounts.  According  to 
this  definition,  the  income  statement  closes  with  a  declara- 
tion of  the  net  corporate  income  arising  out  of  the  trans- 
actions of  the  current  year.  The  profit  and  loss  statement, 
on  the  other  hand,  is  not  confined  to  the  transactions  of 
any  specific  fiscal  period.  It  covers  all  entries  between 
the  income  statement  and  the  general  balance  sheet, 
with  the  single  exception  of  appropriations  of  surplus. 
Further  comment  of  the  profit  and  loss  accounts  will 
conform  to  the  definition  that  reflects  current  practice. 


152     AMERICAN  RAILWAY  ACCOUNTING 


§46.  Profit  and  Loss  Entries  Classified.— The  pri- 
mary accounts  of  the  system  of  records  provided  for 
the  use  of  American  railways  are  as  follows: 


DebU 

Debit  balance  (at  beginning  of 
fiscal  period) 

Debit  balance  transferred  from 
income 

Surplus  applied  to  sinking  and 
other  reserve  funds 

Dividend  appropriations  of  sur- 
plus 

Surplus  appropriated  for  invest- 
ment in  physical  property 

Stock  discount  extinguished 
through  surplus 

Debt  discount  extinguished 
through  surplus 

Miscellaneous  appropriations  of 
surplus 

Loss  on  retired  road  and  equip- 
ment 

Delayed  income  debits 

Miscellaneous  debits 

Unappropriated  surplus  carried 
to  Balance  Sheet 


Credit 
Credit  balance  (at  beginning  of 

fiscal  period) 
Credit  balance  transferred  from 

income 
Profit  on  road  and  equipment 

sold 
Delayed  income  credits 

Unrefundable  overcharges 

Donations 

Miscellaneous  credits 


Deficit  carried  to  Balance  Sheet 


It  will  be  observed  that  the  above  statement  begins 
with  a  debit  or  credit  balance  at  the  beginning  of  the 
fiscal  period  under  review,  and  closes  with  a  ''deficit"  or 
an  ''unappropriated  surplus"  to  be  carried  to  the  balance 
sheet  struck  at  the  close  of  that  period.  Outside  of  these 
transfer  entries,  the  primary  accounts  shown  in  the  fore- 
going lists  may  be  classified  under  three  heads: 

Correction  Entries.  The  first  class  of  profit  and  loss 
entries  covers  all  entries  which  have  for  their  purpose  the 
correction  of  a  previously  declared  surplus  or  deficit. 


PROFIT  AND  LOSS  ACCOUNTS  153 

An  illustration  will  make  this  clear.  In  case  freight  has 
been  carried  and,  after  a  proper  audit,  the  accrued  earnings 
have  been  credited  to  operating  revenues,  it  may  turn 
out  that  the  shipper  is  unable  to  pay  for  the  service  he 
has  received.  The  surplus,  in  the  meantime,  has  been 
declared  and  the  accounts  for  the  year  closed,  on  the  as- 
sumption that  the  freight  bill  will  ultimately  be  paid; 
should  it  become  evident  that  the  bill  is  a  bad  bill  and 
cannot  ])e  collected,  this  amount  should  be  written  out 
of  the  accounts  by  a  credit  to  bills  receivable  and  a 
charge  to  profit  and  loss.  Entries  of  this  sort,  and  they 
cover  a  wide  range  of  events,  have  for  their  sole  purpose 
the  correction  of  an  erroneously  stated  surplus.  It  goes 
without  saying  that,  if  an  error  is  discovered  before  the 
close  of  the  period  for  which  the  surplus  is  declared,  the 
correction  should  be  made  through  the  account  that  covers 
the  error. 

The  Interstate  Commerce  Commission's  classification 
of  profit  and  loss  account  provides  for  this  class  of  cor- 
rections under  the  headings  "Delayed  Income  Credits" 
and  "Delayed  Income  Debits."  This  seems  on  the  face 
of  it  to  be  a  satisfactory  adjustment,  but  much  depends 
upon  the  meaning  given  to  the  word  "delayed"  as  applied 
to  this  class  of  items.  In  the  1914  issue  of  the  profit  and 
loss  accounts,  it  is  distinctly  stated  that  "delayed  items 
are  items  representing  transactions  which  occurred  before 
the  current  fiscal  period."  Even  with  this  apparently 
explicit  rule,  however,  considerable  discretion  must  be 
left  to  the  accounting  officer  for  the  proper  use  of  these 
primary  accounts.  There  is  another  rule  which  states, 
in  effect,  that  "over-lapping"  items  should  be  carried 
by  the  appropriate  accounts  of  the  fiscal  period  to 


154     AMERICAN  RAILWAY  ACCOUNTING 

which  they  pertain.  The  discretion  thrown  on  the  ac- 
countant will  be  properly  exercised,  provided  the  ne- 
cessity of  guarding  the  integrity  of  the  operating  net 
revenue  and  the  corporate  net  income,  for  a  definitely 
prescribed  fiscal  period,  is  adequately  appreciated.  The 
point  to  be  held  in  mind  is  that  many  transactions  take 
place  within  the  fiscal  period  which  do  not  pertain  to  the 
traffic  or  financial  operations  of  the  period,  and  such 
transactions  should  not  be  permitted  to  influence  in  any 
way  the  declaration  of  a  net  corporate  income  for  the 
period  under  consideration.  It  is  a  pecuhar  service  of  the 
profit  and  loss  accounts  to  carry  all  correction  entries 
which  affect  a  declared  surplus. 

Miscellaneous  Gains  or  Losses.  The  second  class  of 
entries  in  the  Profit  and  Loss  statement  covers  miscel- 
laneous gains  or  losses  for  which  no  provision  is  made 
elsewhere  in  the  accounts.  Here  are  included  such  items 
as  profit  and  loss  on  road  and  equipment  sold;  gain  or 
loss  on  the  sale  of  investment  securities;  gain  or  loss  aris- 
ing from  the  sale  of  minor  items  of  physical  property; 
debits  or  credits  resulting  from  the  adjustments  or  can- 
cellations of  balance  sheet  accounts;  unreleased  premiums 
or  unextinguished  discounts  on  funded  debt  re-acquired 
before  maturity;  and  other  similar  items.  From  the 
point  of  view  of  this  class  of  entries,  the  profit  and  loss 
accounts  cover  all  kinds  of  adjustment  entries  which  per- 
tain to  the  property  as  such,  but  which  are  not  directly 
connected  with  either  the  operating  or  the  financial  trans- 
actions of  the  year  under  review. 

Appropriations  of  Surplus.  The  third  class  of  entries 
covered  by  the  profit  and  loss  statement  appears  exclu- 
sively as  debit  items  and  shows  the  use  made  by  a  Board 


PROFIT  AND  LOSS  ACCOUNTS  155 

,  of  Directors  of  the  surplus  placed  at  its  disposal.  This 
j  group  of  entries  is  significant  because  it  discloses  the  cur- 
^  rent  policy  of  the  management.  If  dividends  are  denied 
in  order  to  provide  for  making  improvements,  the  fact 
should  be  recorded.  If  both  dividends  and  improvements 
are  reduced  in  order  to  pile  up  reserves  to  be  used  at 
some  future  time,  this  fact,  also,  should  find  expression 
in  the  records  of  surplus  appropriations.  The  character 
of  the  appropriations  made,  as  well  as  the  amount  appro- 
priated, indicates  the  purpose  and  the  policy  of  the  man- 
agement, a  fact  which  supplies  an  added  practical  reason 
for  bringing  all  this  class  of  entries  into  a  single  statement. 
The  ability  to  furnish  readily  a  correct  analysis  of  the 
accumulated  surplus  is  the  most  exacting  test  of  sound 
accounting.  The  first  step  toward  such  an  analysis  is 
taken  in  connection  with  the  entries  under  consideration 
which,  according  to  current  practice,  appear  as  deduc- 
tions from  net  corporate  income  or  as  charges  to  profit 
and  loss.  It  is  not  essential  that  this  practice  should  be 
changed,  but  it  is  essential,  in  order  to  trace  final  results 
and  to  understand  the  business  meaning  of  this  class  of 
entries,  to  distinguish  between  two  kinds  of  appropriations. 
All  appropriation  charges  group  themselves  under  one 
or  the  other  of  two  headings,  according  as  they  are  charges 
which  stand  for  the  return  of  profits  to  the  property,  or 
are  final  entries,  like  charges  to  operating  expenses  or 
charges  to  income.  Appropriations  that  represent  the 
return  of  profits  to  the  property  would,  of  course,  appear 
on  the  general  balance  sheet  as  a  part  of  the  accumulated 
surplus,  and  the  amounts  appropriated  during  any  fiscal 
period  would  be  shown  as  an  increase  in  the  respective 
headings  under  which  the  accumulated  surplus  is  carried. 


156    AMERICAN  RAILWAY  ACCOUNTING 

What  remains  of  the  surplus,  after  the  deduction  of  all 
appropriations,  is  carried  to  the  balance  sheet  under  the 
caption  "Profit  and  loss — Balance."  A  better  expression 
for  this  balance,  should  it  fall  on  the  credit  side,  is  found 
in  the  definition  of  profit  and  loss  quoted  from  the  accounts 
as  prescribed  by  the  Interstate  Commerce  Commission, 
when  it  is  said  that  it  shows  the  "unappropriated  surplus 
of  the  carrier  at  the  date  of  the  balance  sheet.'*  The  sig- 
nificant point  to  be  noted  is  that  part  of  the  profit  and  loss 
charges  which  stand  for  appropriations  of  surplus,  appear 
on  the  balance  sheet  as  an  offset  to  fixed,  fluid,  or  funded 
assets,  while  a  part  are  a  final  charge  in  the  profit  and  loss 
accounts.  The  former  stand  for  profits  returned  to  the 
property;  the  latter,  for  appropriations  to  outside  interests. 

§47.  Classifications  of  Appropriations. — While  cor- 
rection entries  in  the  profit  and  loss  account,  and  entries 
that  cover  miscellaneous  gains  or  losses  to  the  corporation, 
may  be  difficult  to  handle  in  special  cases,  their  business 
meaning  and  their  accounting  purpose  are  easily  under- 
stood. They  need  not,  therefore,  claim  further  attention 
at  this  time.  This  can  not  be  said,  however,  of  the  charges 
that  cover  appropriations  of  surplus.  The  analysis  of 
this  group  of  charges  may  be  carried  a  step  further. 

The  standard  system  of  railway  accounting  makes  pro- 
vision for  five  kinds  of  appropriations  out  of  surplus  by 
the  Board  of  Directors,  or  whoever  is  in  charge  of  the 
property  as  the  financial  trustee.    These  are: 

Appropriations  for  extensions  to  the  property. 
Appropriations  for  investment  in  non-physical  assets. 
Appropriations  for  the  reduction  of  capitaHzation. 
Appropriations  for  hastening  the  extinction  of  discounts. 
Dividend  appropriations. 


PROFIT  AND  LOSS  ACCOUNTS  157 

The  management,  knowing  the  amount  placed  at  its 
disposal,  makes  provision  for  these  several  appropriations 
according  to  the  relative  strength  of  the  demands  for 
each  purpose. 

(1)  Appropriations  for  Extensions  to  the  Property. 
This  class  of  appropriations  covers  what  is  commonly- 
known  as  "Extensions  of  the  property"  or  "Additions 
and  betterments  to  the  property."  The  final  result  of 
appropriations  for  this  purpose  is  to  be  read  in  the  current 
adjustments  of  the  property  accounts.  When  the  money 
thus  appropriated  is  expended  by  the  engineers,  an  in- 
ventory of  the  property  would  show  that  the  physical 
assets  of  the  corporation  had  been  increased  by  the  amount 
of  cash  expended.  It  should  be  especially  noted,  however, 
that  the  extensions  and  improvements  covered  by  appropri- 
ation of  surplus,  do  not  necessarily  cover  all  of  the  improve- 
ments that  may  have  been  made  during  the  fiscal  period 
under  consideration.  The  money  used  for  improvements 
may  have  been  secured  by  the  sale  of  long-time  securi- 
ties, or  it  may  be  that  the  extensions  and  betterments 
have  been  paid  for  out  of  cash,  but  with  the  purpose  on 
the  part  of  the  corporation  to  reimburse  the  cash  box  by 
the  subsequent  sale  of  bonds.  Failure  to  distinguish 
between  the  nature  of  a  liability  resulting  from  the  con- 
struction of  property  out  of  the  proceeds  of  securities 
sold,  and  from  construction  out  of  cash  that  comes  from 
operation,  has  led  to  much  confusion,  not  alone  in  ac- 
counting matters  but  in  the  discussion  of  equities  as  well. 
In  the  former  case,  the  offset  to  the  new  property  is  Hsted 
on  the  balance  sheet  under  outstanding  securities;  in  the 
latter  case,  it  is  set  up  as  an  appropriation  of  surplus. 
The  primary  account  that  carries  this  entry  stands,  or 


158     AMERICAN  RAILWAY  ACCOUNTING 

should  stand,  as  a  permanent  balance  sheet  Uability. 
It  measures  the  amount  of  past  profit  returned  to  the 
property.  It  cannot  be  expunged  except  by  the  declara- 
tion of  a  stock  dividend,  which  would  require  a  transfer 
from  this  account  to  the  stock  account.  The  propriety 
of  such  a  transfer  raises  a  delicate  problem  in  equity  as 
between  the  public  and  the  railway;  but,  from  the  ac- 
counting point  of  view,  there  is  no  difficulty. 

The  accounting  process  by  which  a  free  surplus  is  con- 
verted into  an  appropriated  surplus  that  stands  for  capital 
investments,  imder  the  standard  rules  of  accounting, 
is  as  follows:  The  first  step  is  the  drafting  of  a  program 
of  improvements,  and  the  adoption  by  the  Board  of  Direc- 
tors of  a  resolution  that  raises  a  credit  in  favor  of  the 
Engineers  equal  to  the  estimated  cost  of  such  improve- 
ments. This  appears  as  a  charge,  either  to  income  or  to 
profit  and  loss,  under  the  primary  accounts  that  carry 
*' income"  or  "profit  and  loss"  appropriations  for  invest- 
ment in  physical  property.  When  the  engineer  spends 
the  money  and  his  vouchers  are  approved,  these  appro- 
priations are  credited  and  corresponding  charges  are 
made  to  the  property  account.  Inasmuch,  however,  as 
this  transaction  involves  a  permanent  increase  in  physical 
assets,  there  must  be  a  corresponding  increase  in  per- 
manent Uabihties,  that  is  to  say, — a  true  record  must  be 
kept  of  the  equities  by  which  the  assets  are  offset  on  the 
balance  sheet.  This  is  attained  by  the  rule  that  the 
amount  charged  to  either  of  the  accounts  named,  "shall 
be  concurrently  credited"  to  an  account  on  the  balance 
sheet  entitled  "Additions  to  property  through  income  or 
surplus."  This  is,  perhaps,  as  satisfactory  a  method  of 
procedure  as  can  be  devised,  a^  long  as  appropriations 


PROFIT  AND  LOSS  ACCOUNTS  159 

out  of  surplus  continue  to  be  mixed  up  with  income  and 
profit  and  loss  entries.  It  is  inconsistent  in  that  it  calls 
for  an  appropriation  from  surplus  before  the  surplus  has 
been  declared.  It  is  incorrect  to  the  extent  that  an  ac- 
count devised  to  carry  the  equity  in  "Additions  to  prop- 
erty" constructed  out  of  profits,  is  required  to  carry- 
also  the  unexpended  balance  of  appropriations  for  addi- 
tions to  property.  This  question  of  the  meaning  of  the 
surplus,  the  rules  for  computing  the  surplus,  and  for 
recording  the  use  of  the  surplus,  ought  to  be  reconsidered 
by  those  who  are  responsible  for  the  standard  system  of 
railway  accounts. 

(2)  Appropriations  for  Investment  in  Non-physical 
Assets.  The  purpose  of  this  class  of  appropriations  may 
be  either  the  solidification  or  extension  of  an  operating 
system,  or  merely  the  investment  of  surplus  funds  which 
otherwise  might  remain  unproductive.  The  result  of  such 
appropriations  are  to  be  found  in  the  records  of  intangible 
assets. 

Unless  some  especial  adjustment  is  made  on  the  Ka- 
bility  side  of  the  balance  sheet,  an  offset  to  such  a  use  of 
money  as  has  been  described  would  be  found  in  the  un- 
appropriated surplus.  To  the  extent  that  the  appro- 
priation was  for  the  purchase  of  securities  not  required 
for  maintaining  the  integrity  of  the  operating  system, 
such  a  result  would  correctly  express  the  situation;  to 
the  extent,  however,  that  the  appropriation  is  expended 
for  the  purchase  of  securities  that  stand  for  property 
brought  into  the  operating  system,  the  investment  is  as 
fixed  as  though  the  money  had  been  spent  in  the  physical 
extension  of  the  line.  The  inclusion  of  this  amount, 
therefore,  in  imappropriated  surplus  shown  on  the  bal- 


160     AMERICAN  RAILWAY  ACCOUNTING 

ance  sheet  would  be  incoi'rect.  Further  consideration  of 
the  point  thus  raised  will  be  found  in  the  next  paragraph. 

(S)  Appropriations  for  the  Reduction  of  Capitalization, 
The  Board  of  Directors  may  see  fit  to  use  a  portion  of  the 
accumulated  surplus  for  the  extinction  of  its  bonded 
indebtedness  or  other  outstanding  liabilities.  This  re- 
sults in  either  of  two  accounting  adjustments.  Should 
the  bond  be  purchased  and  cancelled,  the  business  effect 
would  be  the  transfer  of  an  equity  which  previously  was 
held  by  the  owners  of  the  bonds  now  extinguished,  to  the 
owners  of  the  stock.  The  amoxmt  of  money  thus  used, 
although  appropriated  out  of  surplus  and  made  a  charge 
to  net  corporate  income  or  to  profit  and  loss,  must  still 
remain  as  a  part  of  the  accumulated  surplus.  It  will  not, 
however,  appear  as  an  unappropriated  surplus  but  as  a 
portion  of  the  surplus  used  for  the  extinction  of  funded 
debt. 

A  different  adjustment  would  be  required  if  what  is 
known  as  the  sinking  fund  method  is  used  for  the  extinc- 
tion of  outstanding  obligations.  In  this  case,  the  amount 
appropriated  would  be  transferred  to  the  fund  and  the 
bonds  purchased  would  not  be  cancelled  but  would  be 
carried  in  the  fund.  The  usual  defense  for  this  pro- 
cedure is  that,  on  accoimt  of  the  market  price  of  vari- 
ous kinds  of  securities,  it  may  be  advantageous  to  invest 
the  money  appropriated  for  the  extinction  of  outstanding 
obUgations,  in  the  purchase  of  securities  other  than  the 
securities  issued  by  the  corporation  under  consideration. 
In  this  case,  there  would  be  found  among  the  assets  a  line 
of  securities  held  as  an  offset  to  the  uncancelled  or  out- 
standing bonds  of  the  corporation  concerned.  No  harm 
can  arise  from  this  method  of  procedure,  provided  the 


PROFIT  AND  LOSS  ACCOUNTS  161 

facts  are  properly  recorded  in  the  accounts,  although  it 
must  be  recognized  that  the  balance  sheet  totals  are  dupli- 
cated to  the  extent  of  such  transactions. 

(4)  Appropriations  for  Hastening  the  Extinction  of  Dis- 
counts. The  amortization  of  discounts  which  regularly 
accrue  on  outstanding  bonds,  is  an  income  charge.  This 
is  true  because  all  bonds  have  a  date  of  maturity,  and 
when  they  mature  the  issuing  corporation  is  liable  for 
their  repayment  at  par.  It  is  imperative,  therefore,  that 
a  reserve  be  created  during  the  life  of  the  bond  equal  to 
the  discount  suffered  at  the  time  of  issue;  or,  what  amounts 
to  the  same  thing,  that  a  proportional  amount  of  the 
discount  be  written  out  each  year.  Such  is  the  practice 
of  sound  accounting,  and  such  is  the  rule  laid  down  by 
the  Interstate  Commerce  Commission. 

It  may  be,  however,  that  the  Board  of  Directors  desires 
to  extinguish  the  discount  on  a  special  series  of  bonds 
prior  to  the  date  of  maturity.  To  this  extent  amortiza- 
tion is  a  voluntary  act  on  the  part  of  the  Board,  and 
should  be  cared  for  in  the  profit  and  loss  accounts.  This 
is  the  meaning  of  the  primary  account  "Discount  ex- 
tinguished through  surplus." 

The  extinction  of  discount  on  stock  issued  must  find  its 
authority  in  a  resolution  of  the  Board  of  Directors.  Stocks 
do  not  mature.  They  are  an  evidence  of  proprietor- 
ship and  are  a  Hability  in  an  accounting  sense  only.  If 
the  discount  on  stock  issued  is  to  be  written  out  of  the 
accounts,  it  must  be  by  the  voluntary  choice  of  the  man- 
agement. The  extinction  of  stock  discount,  therefore 
(assuming  such  a  thing  to  exist),  is  a  proper  item  for  a 
charge  to  the  profit  and  loss  accounts. 

(5)  Dividend  Appropriations.  A  solvent  company  will 


162     AMERICAN  RAILWAY  ACCOUNTING 

always  endeavor  to  maintain  its  dividend  payments. 
This  is  one  means  of  maintaining  credit.  The  character 
of  the  dividend,  and  the  interpretation  of  the  fact  that  a 
dividend  is  paid,  varies  with  the  class  of  stock  upon  which 
the  dividend  is  declared.  Some  so-called  dividends  are 
not  properly  charged  to  profit  and  loss,  as  for  example 
the  dividend  which  accrues  upon  stock  guaranteed.  The 
guarantee  makes  this  payment  a  payment  that  accrues 
on  a  contract  and  not  an  administrative  payment.  It  is, 
therefore,  an  income  charge  and  not  a  profit  and  loss 
charge.  Such  dividends  are  classed  with  interest  on  bonds. 
If  a  dividend  that  is  cumulative  remains  unpaid,  it 
should  be  recognized  as  a  UabiUty,  and  an  accounting 
adjustment  made  accordingly.  A  dividend  on  preferred 
stock  is  on  the  border  line  between  a  voluntary  and  a 
contractual  paj-ment;  but  inasmuch  as  it  must  be  voted 
by  the  management,  it  may  properly  be  classed  as  an 
appropriation  out  of  surplus,  and  included  in  the  profit 
and  loss  statement.  With  regard  to  dividends  on  com- 
mon stock,  there  can  be  no  question.  It  is  entirely  at  the 
option  of  the  Board  of  Directors  to  declare  such  a  dividend 
or  to  use  the  surplus  in  other  ways. 


CHAPTER  IX 
GENERAL  BALANCE  SHEET  ACCOUNTS 

There  are  as  many  balances  in  a  system  of  accounts 
as  there  are  congruous  groups  of  entries,  but  there  is  only 
one  general  balance  sheet.  The  word  ''general"  properly 
characterizes  this  group  of  accounting  statements,  first, 
because  it  gathers  to  itself  and  expresses  the  result  of  all 
accounts  and  records  of  the  business  to  which  it  pertains; 
and,  second,  because  the  items  which  it  records  are  cimiu- 
lative  from  year  to  year,  and  the  balance  which  it  declares 
is  the  final  outcome  of  operating  and  financial  transactions 
from  the  beginning  of  the  life  of  the  business  to  the  date 
on  which  the  general  balance  sheet  balance  is  struck. 
The  balance  sheet  statement  serves  as  a  key  to  all 
accounts;  it  is  an  index  to  the  life  history  of  the 
business. 

§  48.  General  Balance  Sheet  Defined. — Technically 
defined,  the  general  balance  sheet  is  a  statement  which 
discloses  the  financial  condition  of  the  corporation  as  of 
the  date  on  which  the  accounts  are  closed.  It  presents 
on  its  debit  side  the  assets,  and  on  its  credit  side  the  Ua- 
biHties,  of  a  corporation,  so  arranged  as  to  show  the  ac- 
cumulated surplus  or  deficit  of  the  business.  As  pubUshed, 
or  as  drawn  up  for  the  information  of  stockholders,  the 
general  balance  sheet  is  usually  a  comparative  statement; 
that  is  to  say,  the  entries  against  the  general  and  primary 
accounts  are  given  for  the  current  and  for  the  previous 
fiscal  period,  and  thus  provide  a  measure  for  the  increase 

163 


164    AMERICAN  RAILWAY  ACCOUNTING 

or  the  decrease  in  the  several  groups  of  items  summarized. 
This  comparative  feature  of  the  general  balance  sheet  is 
of  great  practical  importance,  for  it  enables  one  to  locate 
the  source  or  occasion  of  the  final  gain  or  loss  disclosed, 
and  in  this  manner  directs  attention  to  the  strong  and  to 
the  weak  points  of  the  business. 

The  significance  of  a  general  balance  sheet  is  further 
indicated  by  the  fact  that  any  general  or  comprehensive 
audit  of  the  affairs  of  a  business,  may  be  most  easily  ac- 
complished by  an  analysis  of  the  various  items  carried 
by  this  statement.  Every  balance  sheet  figure  can  be 
traced  through  other  accounts,  all  of  which  are  adjusted 
to  its  requirements,  and  through  these  accounts  may  be 
checked  against  the  original  papers  or  entries  that  stand 
for  the  transactions  recorded.  In  order  to  read  properly 
the  meaning  which  Ues  in  the  balance  sheet  statement, 
one  must  be  familiar  with  the  entire  system  of  accounts 
of  which  it  is  the  final  expression. 

§49.  The  General  Accounts. — The  general  accounts 
prescribed  for  the  use  of  American  railways,  stand  for 
groups  of  congruous  items  which  appear  on  the  balance 
sheet  statement  as  primary  accounts.  For  the  most  part, 
the  titles  of  these  accounts  explain  themselves,  and  a 
consideration  of  their  significance,  here,  would  be  but  a 
repetition  of  many  of  the  accounting  rules  already  con- 
sidered. This  is  true  because  the  figures  entered  against 
many  of  these  primary  accounts  are  themselves  balances 
of  congruous  groups  of  accounting  entries.  The  titles  of 
the  general  accounts,  also,  are  familiar;  but,  inasmuch 
as  in  some  cases  they  carry  specific  meanings  in  railway 
accounting,  their  cursory  consideration,  as  preliminary  to  a 
study  of  the  primary  accounts,  will  not  be  out  of  place. 


\/ 


GENERA.L  BALANCE  SHEET  ACCOUNTS    165 

The  following  is  a  list  of  these  general  accounts  arranged 
in  the  form  of  a  balance  sheet  statement: 

Form  of  General  Balance  Sheet  Statement 

Debit,  or  Assets  Side  Credit,  or  Ldability  Side 

1.  Investments  1.  Capital  Stock 

:J^iiiJi^lL''^^-'^U'C^  Government  Grants 

Long  Term  Debt 

2.  Current  Assets  2.  Current  Liabilities 

3.  Deferred  Assets  3.  Deferred  Liabilities 

4.  Unadjusted  Debits  4.  Unadjusted  Credits 

5.  Balance — Accumulated  Surplus 

Each  of  the  general  accounts  in  the  foregoing  statement 
stands  for  a  group  of  congruous  transactions,  and  the 
first  step  in  understanding  the  balance  sheet  is  to  learn 
the  accounting  significance,  or  the  business,  meaning  of 
each  group. 

Investments  represent,  for  the  most  part,  fixed  assets. 
They  cover  physical  property  created  or  purchased  by  the 
funds  placed  at  the  disposal  of  the  corporation,  as  also 
investments  in  non-physical  property,  whether  such  in- 
vestments are  for  the  purpose  of  creating  an  operating 
system,  or  of  such  a  nature  that  they  can  be  sold  without 
impairing  the  integrity  of  the  property  as  a  business  unit. 
The  chief  item  under  investments  is  the  construction 
cost  as  reported  by  the  engineers  in  charge  of  construction. 

Current  Assets  stand  for  cash  on  hand  or  for  material 
on  hand  or  claims  on  debtors  that  will  be  converted  into 
money  in  the  ordinary  course  of  business  transactions. 
It  is  sometimes  said  that  cash  assets  are  quick  assets, 
and  this  may  be  true  in  the  sense  that  the  evidences 
of  debts  due  the  company  might  be  used  as  security 


166    AMERICAN  RAILWAY  ACCOUNTING 

for  raising  temporary  loans.  As  a  matter  of  fact, 
however,  this  is  seldom,  if  ever,  done.  The  hypothe- 
cation of  current  assets  for  temporary  loans  would  be  a 
publication  of  near  bankruptcy.  Some  of  the  items  cov- 
ered by  current  assets  may  be  immediately  convertible 
into  cash;  but,  as  an  accounting  conception,  it  is  prefer- 
able to  define  them  as  assets  that  will  be  reaUzed  as  a 
result  of  ordinary  business  procedure.  The  great  mass  of 
them  will  be  paid  within  thirty,  sixty,  and  ninety  days 
from  the  date  of  their  origin. 

Deferred  Assets,  in  the  prescribed  system  of  railway 
accounts,  are  given  a  technical  meaning.  They  represent 
appropriations  for  future  expenses.  Working  reserves 
against  which  future  expenses  are  to  be  charged  are  an 
illustration.  The  unexpended  balance  of  such  reserves  is 
carried  on  the  balance  sheet  as  a  deferred  asset. 

Unadjusted  Debits,  from  one  point  of  view,  are  the  same 
as  deferred  assets.  Their  peculiar  characteristic  is  dis- 
closed when  it  is  recognized  that  they  perform  the  service 
of  suspense  accounts  or  clearing  accounts.  Here  are  in- 
cluded rents  or  taxes  paid  in  advance,  the  balance  of 
property  abandoned  not  yet  written  out  of  the  accounts, 
and  other  similar  items. 

*' Capital  Liabilities^^  is  a  phrase  quite  generally  used 
to  cover  the  first  group  of  items  on  the  liabiUty  side  of  the 
balance  sheet.  It  stands  for  the  credit  raised  by  the  in- 
vestors in  favor  of  the  trustees  selected  for  the  manage- 
ment of  the  property,  and  is  represented  on  the  balance 
sheet  prescribed  for  the  use  of  American  railways  by 
"Capital  stock,"  "Government  grants,"  and  "Long 
term  debt." 

In  the  case  of  government  owned  railways,  government 


GENERAL  BALANCE  SHEET  ACCOUNTS  167 

advances  for  the  construction  or  purchase  of  the  property 
would  be  included  under  this  heading.  The  figure  which 
appears  on  the  general  balance  sheet  against  capital 
liabilities  measures  the  relative  claims  of  the  several 
classes  of  proprietory  investors  in  the  property  to  which 
the  corporation  holds  title. 

Current  Liabilities  represent  the  obligations  incurred  by 
the  active  business  which,  it  is  assumed,  will  be  worked 
out  during  the  ordinary  course  of  business  transactions. 
Short  time  notes  that  have  accrued  but  have  not  yet 
matured,  or  bills  that  have  been  audited  but  not  yet  paid, 
and  other  similar  liabilities,  are  entered  on  the  balance 
sheet  under  this  general  head. 

Deferred  Liabilities,  like  deferred  assets,  are  confined  by 
the  prescribed  system  of  accounts  to  transactions  within 
the  corporation.  A  provident  fund  created  in  the  interest 
of  employees  for  which  the  corporation  is  responsible  is  an 
illustration  of  a  deferred  liability.  The  liability  is  deferred 
until,  by  virtue  of  accident  or  sickness,  or  old  age,  the 
corporation  will  be  called  upon  to  make  payment  to  the 
employees.  The  recognition  of  the  liability,  meanwhile, 
prevents  the  dissipation,  in  dividends  or  other  similar 
expenditures,  of  the  assets  out  of  which  the  liabiUty  is  to 
be  paid  when  it  matures. 

Unadjusted  Credits,  like  unadjusted  debits,  represent 
accoimts  which,  for  any  reason,  are  not  or  can  not  be 
closed.  The  figure  returned  on  the  balance  sheet  under 
this  heading,  the  sum  of  the  balances  of  the  several  ac- 
counts as  of  the  date  on  which  the  balance  sheet  is  closed. 

Corporate  Surplus  represents  the  accumulated  profits  of 
the  business  from  the  inception  of  the  business  enterprise 
under  consideration.    A  portion  of  this  surplus  may  have 


168     AMERICAN  RAILWAY  ACCOUNTING 

gone  back  into  the  property  through  appropriations  of 
previous  years  for  additions  and  betterments,  sinking 
funds,  and  the  like;  the  remainder  measures  (or  under 
perfect  accounting  should  measure)  the  free  or  unappro- 
priated surplus  subject  to  future  appropriations.  The 
total  *' corporate  surplus"  covers  both  the  appropriated 
and  the  unappropriated  surplus  as  disclosed  by  the  bal- 
ance sheet  statement,  and  must  be  recognized  as  the  most 
significant  single  figure  carried  by  any  of  the  classifica- 
tions or  statements  which  make  up  the  system  of  accounts. 

§  50.  The  Balance  Sheet  Statement.— The  form  of 
balance  sheet  statement  submitted  above  shows  the 
balance  on  the  credit  side  of  the  account.  This  means  that 
the  statement  is  drawn  on  the  assumption  that  the  business 
under  consideration  has  been  profitable.  Had  the  final 
result  of  the  business  been  a  loss,  this  balance  would  have 
appeared  on  the  debit  side  of  the  statement.  In  either 
case,  however,  the  figure  set  down  as  the  balance  must  be 
taken  in  connection  with  the  capital  stock,  if  it  is  desired 
to  measure  the  value  of  the  proprietory  interest  in  the 
assets.  This  is  true  because  the  equity  in  the  surplus  lies 
with  the  stockholders.  The  holders  of  the  bonds  have  no 
such  equity,  at  least  no  direct  equity,  nor,  as  the  law  stands 
at  the  present  time,  can  it  be  said  that  the  government  or 
the  public  has  an  equity  in  the  accumulated  surplus.  The 
pubhc  may  have  an  interest  in  this  surplus  which  the 
directors  are  not  at  liberty  to  disregard,  but  this  falls 
short  of  what  the  law  recognizes  as  an  equity  in  the  prop- 
erty. The  accumulated  surplus  partakes  of  the  nature  of 
an  undivided  profit. 

It  is  perhaps  superfluous  to  explain  to  the  readers  of 
this  treatise  why  assets  are  on  the  debit  side  and  liabilities 


GENERAL  BALANCE  SHEET  ACCOUNTS    169 

on  the  credit  side  of  the  balance  sheet.  Since,  however, 
this  is  sometimes  perplexing  to  those  who  have  not  handled 
accounts,  a  word  of  explanation  may  be  acceptable. 

Every  system  of  accounts  stands  for  an  active  business. 
Its  purpose  is  to  arrive  at  an  accurate  measure  of  the 
gain  or  loss  incurred  by  the  business.  Even  in  the  case 
of  a  privately  owned  business,  the  man  who  owns  it  de- 
sires to  know  whether  it  is  a  profitable  or  an  unprofitable 
undertaking.  In  order  to  find  this  out,  it  is  necessary  that 
he  place  a  certain  amount  of  his  money  at  the  disposal  of 
the  business,  and  that  he  require  accounts  to  be  kept  for  the 
business  as  though  it  were  an  independent  industrial  unit. 

In  the  case  of  railway  accounting,  this  point  of  approach 
is  easily  understood,  because  railways  are  recognized  as 
corporations,  and  a  corporation  is  a  legal  personaUty. 
Railway  accounts,  therefore,  are  corporation  accounts  and 
not  accounts  of  the  stockholders.  A  corporation  holds 
the  title  to  the  property,  but  back  of  this  property  stand 
the  stockholders  and  the  bondholders  who  have  furnished 
the  funds.  The  corporation  acknowledges  the  Uability 
incurred  to  the  stockholders  and  the  bondholders  for  the 
moneys  placed  at  its  disposal,  and  in  so  doing  acknowl- 
edges that  the  purchasers  of  securities  have  placed  a  fund 
of  money  to  the  credit  of  the  corporation.  They  have  the 
right  to  expect  that  the  business  will  acknowledge  this 
credit,  and  return  the  investment  in  case  the  business  is 
wound  up. 

The  same  reasoning  apphes  to  current  Uabilities,  de- 
ferred Uabilities,  or  unadjusted  credits.  Current  liabilities, 
for  example,  mean  that  the  corporation  has  become  pos- 
sessed of  property  for  which  it  has  not  made  payment, 
or  that  it  has  received  money  from  some  outside  agency 


170     AMERICAN  RAILWAY  ACCOUNTING 

which  eventually  must  be  turned  over,  but  which,  until 
settlement  is  made,  appears  somewhere  in  the  list  of  cur- 
rent assets.  These  outside  parties  have  placed  material 
or  money  to  the  credit  of  the  corporation  which  the  cor- 
poration recognizes  by  writing  them  on  its  balance  sheet 
as  a  liability. 

This  analysis  is  presented  in  another  way  when  it  is 
recognized  that  the  Board  of  Directors  of  a  corporation 
are  the  trustees  of  the  funds  placed  in  their  hands.  These 
trustees,  who  as  persons  represent  the  corporation,  ac- 
knowledge the  moneys  placed  to  their  credit  through  the 
sale  of  stocks  and  bonds,  and  this  they  do  by  writing  up 
the  par  value  of  the  securities  as  a  liability  of  the  cor- 
poration. In  this  manner,  the  business  assumes  the  duty 
of  making  these  securities  good.  The  liabilities  thus  ac- 
cepted by  the  corporation,  are  an  accounting  n\easurement 
of  the  credits  raised  in  favor  of  the  trustees. 

On  the  other  hand,  as  an  accounting  offset  to  the  credits 
raised,  the  trustees  set  up  in  the  accounts  a  charge  to  the 
property,  the  balance  of  which  at  any  time  measures  the 
assets  of  the  business,  that  is  to  say,  of  the  corporation  as 
a  legal  personality.  A  business  is  charged  with  its  assets 
and  credited  with  its  liabilities. 

By  referring  to  the  above  form  of  the  general  balance 
sheet  statement,  it  will  be  observed  that  each  general 
account  on  the  assets  side  is  offset  by  a  corresponding 
group  of  entries  on  the  hability  side.  Against  invest- 
ments are  to  be  found  securities  sold  by  the  corporation; 
against  current  assets  are  to  be  found  current  liabilities; 
against  deferred  assets  are  to  be  found  deferred  liabilities; 
and  against  unadjusted  debits  are  to  be  found  unadjusted 
credits.    This  arrangement  seems  to  imply  that  a  balance 


GENERAL  BALANCE  SHEET  ACCOUNTS    171 

might  be  struck  for  each  group  of  primarj^  accounts 
gathered  together  under  these  general  headings.  Speak- 
ing broadly,  this  may  be  done,  and  it  should  be  the  aim  of 
the  accountant  to  so  define  and  classify  original  entries 
that  this  may  be  done  with  a  fair  degree  of  accuracy.  But 
in  so  complicated  a  business  as  that  carried  on  by  American 
railways,  it  would  not  be  safe  to  assume  that  these  inter- 
mediate balances  are  worthy  of  unlimited  confidence.  It 
is  necessary  to  examine  the  primary  accounts,  and  pos- 
sibly the  entries  from  which  these  primary  accounts  are 
constructed,  before  arriving  at  the  final  interpretation  of 
intermediate  balances. 

§  51.  Analysis  of  Investments. — The  titles  of  the 
primary  accounts,  together  with  their  definitions,  will  be 
found  in  Appendix  C.  Three  classes  of  assets  are  carried 
under  the  general  title  "  Investments."  These  are  physical 
property,  funds  held  in  trust  as  offsets  to  liabilities  out- 
standing, and  investments  in  securities.  Each  of  these 
three  classes  will  be  considered. 

Physical  Property.  The  figures  on  the  balance  sheet 
that  together  measure  the  amount  invested  in  physical 
property,  are  covered  by  the  three  primary  accounts  *' In- 
vestment in  road  and  equipment,"  ''Improvements  on 
leased  railway  property,"  and  ''Miscellaneous  physical 
property."  The  first  is  taken  from  the  construction  ac- 
counts, understanding  by  that  phrase  both  original  con- 
struction and  additions  and  betterments  made  subsequent 
to  the  transfer  of  the  property  for  purposes  of  operation. 
These  figures  stand  for  the  cost  of  the  property  to  date, 
and  not  for  its  present  value.  The  present  value  of  the 
property,  at  any  particular  time,  may  be  less  than  its 
cost,  because  of  the  depreciation  which  it  may  have 


172     AMERICAN  RAILWAY  ACCOUNTING 

suffered  since  the  investment  was  made;  or  it  may  be 
more,  on  account  of  appreciation.  Such  appreciation 
in  this  country,  however,  is  no  part  of  current  ac- 
counting and  it  may,  for  that  reason,  be  set  aside.  In 
case  adequate  depreciation  reserves  have  been  main- 
tained by  current  charges  to  operating  expenses,  the  un- 
expended balances  of  such  reserves  will  appear  on  the 
balance  sheet  and  will  indicate  the  amount  that  must  be 
deducted  from  the  cost  of  the  property  in  order  to  arrive 
at  its  present  book  value. 

It  is  the  practice  of  some  accountants  to  reduce  the  cost 
of  property  carried  on  the  balance  sheet  by  the  deprecia- 
tion which  has  accrued,  rather  than  to  maintain  the  bal- 
ance sheet  statement  of  cost  at  its  original  figure  on  the 
assets  side  of  the  account,  and  carry  the  depreciation  as 
a  reserve  on  the  liability  side  of  the  accomit.  The  chief 
objection  to  this  method  of  treatment  is  that  it  results 
in  the  insertion  of  a  figure  which  assumes  to  measure  an 
"investment"  that  cannot  be  checked  against  capital  ex- 
penditures. Another  obj  ection  is  found  in  the  fact  that,  ac- 
cording to  this  method  of  treatment,  the  accounts  fail  to 
record  the  responsibility  of  the  revenues  to  restore  to  the 
property  such  assets  as  have  been  dissipated,  no  matter 
what  the  cause  of  such  dissipation  may  be.  There  is  con- 
siderable danger  that  the  management  of  a  property  will 
fail  to  hold  in  mind  an  outstanding  hability  that  finds  no 
place  among  the  Uabilities  listed  on  the  general  balance 
sheet. 

Many  railways  invest  in  physical  property  which  is 
either  entirely  distinct  from  transportation  property,  or 
is  connected  with  it  only  in  an  indirect  way.  For  example, 
a  railway  corporation  may  own  mines,  mineral  and  timber 


GENERAL  BALANCE  SHEET  ACCOUNTS  173 

lands,  commercial  plants,  sawmills,  and  other  manufac- 
turing plants.  If  these  are  carried  as  independent  in- 
vestments and  operated  for  the  purpose  of  profit,  the 
inclusion  of  their  capital  in  the  railway  balance  sheet  is 
improper.  In  such  cases,  there  ought  to  be  a  separation 
of  the  capital,  and  an  independent  set  of  accounts  ought 
to  be  raised  for  such  commercial  enterprises.  If,  however, 
this  can  not  be  done,  the  balance  sheet  should  provide 
for  a  separate  statement  for  this  class  of  property.  Should 
the  operation  of  a  commercial  enterprise  be  incidental 
to  the  rendering  of  a  transportation  service  as,  for  example, 
the  manufacture  of  ice  for  refrigeration,  or  the  mainte- 
nance of  hotels  for  the  development  of  passenger  traffic, 
the  investment  may  be  regarded  as  primarily  for  trans- 
portation purposes.  It  is  not  always  easy  to  draw  a  line 
between  an  investment  in  physical  property  which  does 
and  one  which  does  not  render  a  transportation  service. 
The  principles  which  should  guide  in  distinguishing  be- 
tween these  two  classes  of  investments  were  considered  in 
connection  with  incidental  revenues.  ^ 

Improvements  on  leased  property,  like  improvements 
on  property  which  the  lessee  corporation  owns,  stand 
for  physical  property,  but  such  is  their  contractual  char- 
acter that  they  are  given  a  separate  primary  account  on 
the  balance  sheet.  In  order  to  understand  this  item,  it  is 
necessary  to  call  to  mind  what  has  already  been  said  rela- 
tive to  railway  system  building.  A  railway  corporation 
as  an  operating  system,  makes  use  of  a  great  deal  of  prop- 
erty to  which  it  does  not  have  title,  but  which  it  controls 
through  incomplete  mergers,  ownership  of  stock,  or  current 
leases.  After  the  execution  of  a  long  time  lease,  the  lessor 
proprietors  are  no  longer  interested  in  the  improvement 


174    AMERICAN  RAILWAY  ACCOUNTING 

of  the  property;  for  the  lessee,  on  the  other  hand,  it  is  an 
operating  necessity  that  improvements,  extensions,  addi- 
tions and  betterments  should  be  made  on  this  property, 
as  well  as  on  the  property  to  which  it  has  title.  In  case 
the  lease  provides  that,  at  its  expiration,  the  lessee  com- 
pany has  an  equity  in  the  improvements  made  on  the 
property  of  the  lessor,  the  accumulation  of  the  cost  of 
the  improvement  in  a  separate  primary  account  is  un- 
doubtedly correct;  for  at  the  expiration  of  the  lease,  the 
lessor  company  would  be  obliged  to  compensate  the  lessee 
company  for  such  improvements  as  had  been  made. 

There  are  many  cases,  however,  in  which  the  lease 
makes  no  mention  of  compensation  for  improvements 
on  the  property  of  the  lessor,  and  it  is  doubtful  if  the 
courts,  inclined  as  they  are  to  the  strict  interpretation  of 
contracts,  would  recognize  that  the  lessee  had  an  equity 
in  such  investments;  but  this  is  no  reason  why  a  separate 
primary  account  should  not  be  kept.  In  case  of  foreclo- 
sure, or  of  appraisal  at  the  termination  of  the  lease,  it  is 
essential  that  each  property  be  charged  with  the  improve- 
ments made  for  its  benefit.  The  cost  of  improvements 
must  be  localized  in  order  to  keep  clear  the  equities  that 
pertain  to  the  several  parties  concerned,  and  the  records 
should  be  so  kept  as  to  make  this  possible. 

Funds  held  under  Trust.  These  are  of  two  kinds, — 
sinking  funds  and  trust  deposits.  The  time  has  passed 
when  provision  for  a  sinking  fund  in  the  writing  of  bonds 
for  responsible  corporations  tends  to  raise  the  price  of 
such  bonds.  On  the  contrary,  the  investor  prefers  bonds 
for  which  there  is  no  plan  of  repayment,  provided  they 
are  good  bonds.  Nor  has  the  corporation  any  motive  to 
expunge  a  debt  that  is  funded  on  reasonable  terms,  except 


GENERAL  BALANCE  SHEET  ACCOUNTS    175 

it  be  to  raise  the  price  of  stocks.  From  the  standpoint 
of  the  public,  also,  sinking  funds  are  of  no  particular 
significance.  So-called  sinking  fund  appropriations  that 
rest  upon  the  will  of  the  management  have  no  binding 
character,  and  might  as  well  not  exist.  If,  however,  sink- 
ing funds  have  been  established,  they  certainly  stand  for 
an  investment  of  the  corporate  surplus,  and  are  properly 
classified  as  an  investment  asset. 

Trust  deposits  are  not  exposed  to  the  same  criticism, 
provided  they  rest  upon  contractual  agreements,  and 
provided  further  that  some  outside  party  is  interested  in 
the  contract.  Under  such  conditions,  it  is  probable  that 
the  asset  which  they  represent  will  prove  to  be  a  stable 
asset.  If,  however,  there  is  any  uncertainty  in  the  con- 
tract, or  if  the  terms  of  the  contract  are  such  as  to  lead 
easily  to  misunderstanding,  trust  deposits  are  quite  likely 
to  be  abused.  It  is  very  difficult  for  a  management  hard 
pressed  to  meet  expenses,  to  keep  its  hands  off  this  class 
of  funds,  even  though  their  use  may  mean  the  reversal  of 
a  previously  established  policy.  To  make  use  of  these 
funds  for  a  purpose  not  contemplated  by  their  creation 
must  tend  to  depress  the  credit  of  the  corporation. 
However,  if  deposit  fimds  of  this  sort  exist,  they  are 
properly  classed  as  an  investment  asset. 

Security  Investments.  Most  active  American  rail- 
ways represent  large  financial  interests,  in  addition  to 
their  interest  in  the  property  to  which  they  have  direct 
title.  This  is  the  result,  primarily,  of  the  manner  in  which 
independent  railway  properties  have  been  organized  into 
large  and  comprehensive  systems  of  operating  railways. 
These  systems  have  been  built  by  the  merger  of  two  or 
more  properties,  by  long  term  leases  whereby  the  prop- 


176    AMERICAN  RAILWAY  ACCOUNTING 

erty  of  one  corporation  is  handed  over  to  another  corpora- 
tion for  the  purpose  of  operation,  and  through  the  owner- 
ship by  one  corporation  of  a  majority  of  the  stock  of 
another  corporation.  Without  entering  into  even  a  cur- 
sory study  of  system  building,  it  is  evident  that  the  inter- 
corporate holding  of  railway  securities  falls  under  one  or 
the  other  of  two  heads:  first,  of  those  securities  which  are 
held  for  the  purpose  of  perpetuating  the  integrity  of  an 
operating  system;  and,  second,  of  those  securities  acquired 
for  investment.  In  either  case,  the  securities  concerned 
represent  an  investment  and  should  appear  on  the  balance 
sheet  as  an  investment  asset;  but  it  is  important  to  dis- 
tinguish between  those  acquired  for  the  purpose  of  build- 
ing up  an  operating  system,  and  those  acquired  for  the 
interest  or  dividend  which  they  bear.  The  former  are 
not  quick  assets.  They  cannot  be  sold  to  meet  an  emer- 
gency. A  corporation  hard  pressed  might  as  well  dispose 
of  its  locomotives,  or  its  bridges,  as  to  dispose  of  such 
securities.  In  the  same  way  that  the  sale  of  physical 
property  used  for  transportation  purposes  would  bring 
the  normal  operations  of  a  railway  speedily  to  a  close, 
so  the  sale  of  the  securities  of  a  subsidiary  corporation, 
whose  physical  property  is  a  part  of  an  operating  system, 
would  tend  to  disintegrate  the  system. 

Stocks  held  for  investment,  however,  are  quick  assets, 
and  may  be  recognized  as  a  partial  offset  to  the  free  or 
unappropriated  surplus.  In  any  case,  the  accountant 
should  draw  a  line  between  these  two  classes  of  security 
assets,  and  enter  them  separately  on  his  balance  sheet 
statement.  While  both  are  assets,  and  both  are  assets  in 
the  form  of  securities,  their  function,  or  what  may  be 
termed  their  financial  significance,  is  entirely  different. 


GENERAL  BALANCE  SHEET  ACCOUNTS  177 

It  is  doubtless  for  this  reason  that  the  form  of  the  general 
balance  sheet  statement  provided  for  the  use  of  American 
railways,  distinguishes  between  investments  of  "affiliated 
companies"  and  "other  investments."  In  both  cases, 
the  sub-primary  entries  are  stocks,  bonds,  notes,  and 
advances. 

§  52.  Analysis  of  Capital  Liabilities. — The  offset  to 
investments  which  appears  on  the  debit  side  of  the 
balance  sheet  is  capital  liabiUties,  or,  to  use  the  phra- 
seology of  the  prescribed  system  of  accounts,  stocks, 
government  grants,  and  long  term  debts.  This  means 
that  all  funds  assigned  for  investment,  exclusive  of  profits 
returned  to  the  property,  arise  either  from  the  sale  of 
stocks,  from  government  grants,  or  from  the  sale  of 
long  term  debts.  The  standard  balance  sheet  makes  a 
group  of  this  class  of  liabilities  which  covers  primary 
accounts  751  to  757  inclusive,  as  shown  on  page  430  of 
Appendix  C. 

It  is  not  necessary  to  consider  the  various  kinds  of 
stocks  that  have  been,  or  may  be,  issued  by  railway  cor- 
porations, nor  to  explain  that  stocks,  although  standing 
for  proprietorship,  are  an  accounting  liability,  whereas 
bonds  are  both  an  accounting  and  a  legal  liability.  A 
knowledge  of  these  fundamental  facts  may  be  assumed. 

All  book  entries  of  stocks  and  bonds  are  made  at  their 
par  value.  The  propriety  of  this  is  found  in  the  fact  that 
the  par  or  face  value  of  securities  measures  the  Uability 
which  the  corporation  has  assumed  in  the  issue  of  stocks 
or  bonds.  The  entry  of  securities  at  their  par  value, 
however,  raises  an  accounting  question,  whenever  the 
original  sale  of  securities  was  made  either  at  a  premium  or 
at  a  discount.    The  price  of  issue,  and  not  the  par  value, 


178     AMERICAN  RAILWAY  ACCOUNTING 

determines  the  amount  of  cash  collected  from  their  sale 
for  investment.  If,  now,  the  Uability  is  set  up  as  the  par 
of  the  security,  there  may  be  a  discrepancy  between  the 
true  Uability  and  the  true  asset.  The  accounting  question 
thus  raised  is  met  by  providing  a  separate  primary  account 
in  which  to  carry  ''premium  on  stock  sold,"  and  by  pro- 
viding further  that  discounts  should  be  carried  on  the 
balance  sheet  under  the  general  heading  of  "unadjusted 
debits"  until  such  time  as  they  are  written  out  of  the 
accounts.  It  is  possible,  therefore,  for  one  who  desires 
to  compare  the  cost  of  property  with  the  proceeds  of 
securities  sold  in  order  to  provide  funds  for  meeting  that 
cost,  to  find,  on  the  balance  sheet  statement  (and  in  the 
analysis  of  supporting  accounts),  all  the  facts  required  for 
this  purpose. 

Another  difficulty  arises  in  making  balance  sheet  en- 
tries for  securities.  Securities  formally  issued  may  be  held 
in  the  treasurj'-  subject  to  sale,  or,  if  sold,  may  be  re- 
purchased for  sinking  funds  or  other  kinds  of  investments. 
To  meet  this  difficulty,  the  accounting  rules  prescribed  for 
the  use  of  American  railways  requires  that  both  figures 
appear  on  the  balance  sheet  statement,  but  that  the  figure 
used  in  arriving  at  the  final  balance  should  be  the  dif- 
ference between  the  securities  ''nominally  outstanding*' 
and  those  which  are  held  by  or  for  the  corporation  under 
consideration  at  the  date  on  which  the  balance  sheet  is 
struck.  This  is  the  meaning  of  the  "short"  and  "long" 
entries  for  which  the  balance  sheet  statement  makes  pro- 
vision. By  means  of  this  device,  the  habiUties  actually 
outstanding  at  the  date  of  the  statement  are  disclosed. 

Yet  another  point  must  be  held  in  mind.  Many  of  the 
securities  issued  and  fisted  as  outstanding  are  not  issued 


GENERAL  BALANCE  SHEET  ACCOUNTS  179 

against  physical  property,  but  against  other  securities 
owned.  This  means  that  two  kinds  of  securities,  or  it 
may  be  three  or  four,  He  against  the  same  physical  prop- 
erty. So  far  as  the  balance  sheet  statement  of  any  par- 
ticular corporation  is  concerned,  this  fact  of  duplicate 
securities  is  of  relatively  slight  importance;  but  for  one 
who  endeavors  to  construct  a  consoHdated  balance  sheet 
of  the  railways  of  the  country  as  a  whole,  it  is  necessary 
to  ehminate  all  duplications  resulting  from  intercorporate 
ownership  of  railway  securities.  The  Interstate  Commerce 
Commission  has  been  at  great  pains  to  require  reports  of 
such  a  character  as  to  permit  the  elimination  of  this  du- 
pUcation.  In  reading  the  balance  sheet  statement  of  an 
individual  corporation,  it  is  necessary  to  know  the  details 
of  these  collateral  issues. 

§  53.  Current  Assets  and  Current  Liabilities. — The 
standard  form  of  general  balance  sheet  statement,  covers 
^'current  assets"  in  primary  accounts  708  to  719;  and 
"current  habilities"  in  primary  accounts  758  to  768,  both 
inclusive.  The  titles  to  these  accounts  as  also  their  de- 
scriptive text  may  be  found  in  Appendix  "C." 

1.  The  Question  of  Offsets.  Current  assets  can  not  be 
regarded  as  an  offset  against  current  UabiHties,  and  for 
that  reason  their  net  balance  carries  no  very  significant 
meaning.  Only  in  the  case  of  a  few  accounts  is  there  even 
an  apparent  connection.  Loans  and  bills  receivable  seem 
to  indicate  that  moneys  are  coming  in  with  which  to  meet 
loans  and  bills  payable,  and  in  a  rough  and  indefinite  sort 
of  a  way  this  may  be  true.  An  examination  of  details, 
however,  would  show  that  there  is  no  connection  between 
the  transactions  that  lie  back  of  the  two  accounts.  The 
same  may  be  said  of  "Traffic  and  car-service  balances" 


180     AMERICAN  RAILWAY  ACCOUNTING 

receivable  and  payable,  and  "Miscellaneous  accounts" 
receivable  and  payable.  From  the  phraseology  used  it  is 
natural  to  assume  that  some  certain  or  definite  business 
relation  existed  between  them,  and  that,  judging  of  the 
financial  condition  of  a  business,  the  one  could  be  used  as 
an  offset  against  the  other.  But  one  is  not  at  hberty  to 
treat  a  debit  balance  of  any  sort  as  cash  in  hand  or  as 
a  quick  asset.  What  one  owes  must  be  paid;  what  one 
enters  on  his  books  as  receivable  may  never  be  paid. 
Such,  at  least,  is  the  assumption  of  a  business  that  expects 
to  continue. 

An  examination  of  the  titles  of  the  other  accounts  fails 
to  suggest  any  relation  between  the  debit  and  credit 
entries  recorded  under  current  assets  and  current  liabil- 
ities. This  comment  is  pertinent  in  view  of  the  loose  and 
frequently  improper  use  made  of  the  operating  balances 
grouped  together  on  the  general  balance  sheet  as  current 
accounts. 

2.  The  Period  Covered.  It  is  a  practical  necessity  that 
some  time  limit  be  assigned  for  current  assets  and  current 
liabilities;  for  without  an  arbitrary  rule  stating  how  long 
an  item  may  continue  to  be  classed  as  a  current  item,  this 
group  of  accounts  will  tend  to  lose  its  business  significance. 
With  regard  to  "loans  and  bills,"  such  a  rule  is  laid  down 
in  the  prescribed  system  of  accounts.  Obligations  which 
mature  more  than  a  year  from  the  date  of  their  issue, 
are  excluded  from  current  accounts.  In  practice,  this 
rule  is  not  unfrequently  extended  to  cover  all  the  primary 
accounts  of  this  group,  with  the  exception  of  "Materials 
and  supplies."  A  healthy  minded  accountant  will  in- 
stinctively clear  out  of  current  assets  and  current  liabil- 
ities any  items  of  more  than  twelve  months*  standing.    It 


GENERAL  BALANCE  SHEET  ACCOUNTS    181 

is  certainly  bad  business  procedure  to  permit  transactions 
which  pertain  to  two  or  three  years  past,  to  be  mixed  up 
with  current  transactions.  Large  suspense  accounts  are 
the  occasion  of  a  just  suspicion,  even  though  they  are 
properly  classified  on  the  balance  sheet;  but  a  suspense 
item  in  the  records  devised  for  current  business  is  in- 
defensible. 

3.  Materials  and  Supplies.  Under  this  heading  will  be 
found  the  balance  of  the  stores  accounts  on  the  date  of 
the  balance  sheet  statement.  This  set  of  account  is 
usually  kept  separate  from  the  other  accounts,  and  is 
under  the  immediate  direction  of  an  officer  known  as  the 
*' storekeeper."  In  view  of  the  large  amounts  of  supplies 
used  by  operating  railways,  it  may  be  found  advanta- 
geous to  buy  materials  in  large  quantities.  The  store- 
keeper is  charged  with  such  purchases  as  are  turned  over 
to  him,  and  he  takes  credit  when  they  are  issued  to  any 
department  of  the  railway  service  authorized  to  make 
requisition  for  supplies.  The  store  keeper's  books  should 
show,  day  by  day,  the  amount  of  materials  and  suppHes 
on  hand.  It  is  this  balance  that  is  transferred  to  the 
balance  sheet  under  the  primary  account  "Material  and 
Supplies." 

The  figure  entered  against  this  account  is  similar  to 
other  current  assets  in  that  it  stands  for  transactions  on 
their  way  towards  cash.  Although  the  materials  and 
supplies  on  hand  may  be  of  such  a  character  that  they  can 
be  sold,  from  an  operating  point  of  view  they  are  not 
capable  of  sale.  The  coal  on  hand,  for  example,  was 
bought  for  the  purpose  of  burning  in  the  locomotives  in 
order  to  earn  revenue  by  the  transportation  of  passengers 
and  freight.    Its  conversion  into  cash  is  through  the  proc- 


182     AMERICAN  RAILWAY  ACCOUNTING 

ess  of  operation.  The  same  is  true  of  bolts  for  the  shops, 
paint  for  bridges,  parts  for  the  repair  of  cars  and  locomo- 
tives, and  all  other  materials  charged  to  the  storekeeper. 
It  is  in  this  sense  that  materials  and  supplies  are  current 
assets,  but  it  should  never  be  forgotten  that  they  are  con- 
vertable  into  cash  only  through  the  sale  of  traffic. 

One  can  not  apply  the  twelve  months^  rule  to  this  class 
of  current  assets.  It  should,  of  course,  be  the  purpose  of 
the  purchasing  agent  to  make  purchases  of  materials  and 
supplies  in  such  quantities,  and  at  such  times,  as  to  tie  up 
the  least  possible  amount  of  cash ;  but  in  view  of  threat- 
ened possible  fluctuations  of  the  market,  conditions  may 
arise  which  would  justify  a  cash  investment  in  certain 
kinds  of  materials  which  could  not  be  worked  out  within 
a  twelve  months'  period.  The  administration  of  the  store- 
keeper's department  is  subject  to  business  rules  that  per- 
tain to  no  other  department  of  the  railway  service.  The 
fact  that  the  balance  of  the  stores  accounts,  when  trans- 
ferred to  the  balance  sheet  as  a  current  asset,  covers  ma- 
terials carried  in  stock  for  two  or  three  years,  is  not  in 
itself  a  criticism  of  the  purchasing  agent.  It  is  important, 
however,  and  it  is  the  practice  of  well  administered  rail- 
ways, to  make  frequent  inventories  of  the  materials  and 
supplies  on  hand,  with  the  view  of  eliminating  from  this 
account  the  material  that  for  any  reason  is  worthless,  and 
for  the  purpose  of  adjusting  the  storekeeper's  balance 
to  the  current  value  of  the  stock  actually  on  hand.  An 
overstatement  of  materials  and  supplies  results  in  an 
overstatement  of  the  free  surplus. 

4.  Current  Liability  Accounts.  It  is  essential  that  any 
statement  that  aims  to  disclose  the  financial  standing  of  a 
business  at  a  given  date  must  acknowledge,  not  only  all 


GENERAL  BALANCE  SHEET  ACCOUNTS    183 

outstanding  liabilities  which  have  matured,  but  also  the 
size  to  which  accruing  liabilities  have  grown.  Interest, 
for  example,  if  payable  semi-annualh^,  may  not  be  due 
until  thirty  days  after  the  date  of  the  balance  sheet  state- 
ment, but  it  constitutes  a  liability  equal  to  five-sixths 
of  the  amount  which  must  ultimately  be  paid.  The  pri- 
mary account  "Unmatured  interest  accrued"  carries  this 
liability.  The  same  is  true  of  "Unmatured  dividends 
declared,"  provided  such  dividends  are  not  to  be  paid  until 
after  the  first  day  after  the  date  on  which  the  balance 
sheet  is  closed. 

Under  current  Habilities  are  also  included,  interest, 
dividends,  and  funded  debts  which  have  matured,  but 
which  for  any  reason  remain  unpaid  at- the  date  of  the 
balance  sheet  statement.  The  balance  sheet  statement 
must  recognize  all  habilities  of  every  kind  and  sort  in 
order  to  avoid  an  overstatement  of  the  surplus. 

§  54.  Items  Classed  as  "  Deferred  "  and  "  Unad- 
justed."— The  form  of  balance  sheet  used  by  American 
railways  provides  for  two  sets  of  general  accounts,  called 
respectively  deferred  assets  and  deferred  liabilities,  and 
unadjusted  credits  and  unadjusted  debits.  The  text 
pertaining  to  these  accounts  may  be  found  in  Appendix  C. 

It  is  a  little  difficult  to  understand  why  "deferred  as- 
sets" should  be  distinguished  from  "unadjusted  debits," 
and  that  a  similar  distinction  should  be  made  on  the 
credit  side  of  the  balance  sheet.  The  most  that  can  be 
said  for  this  analysis  is  that  it  enables  the  separation  of 
contracts  and  operating  adjustments  that  pertain  to  dif- 
ferent interests  of  the  same  corporation,  from  contracts 
and  operating  adjustments  between  the  corporation  and 
outside  interests.    If  this  be  all,  the  distinction  is  secured 


184     AMERICAN  RAILWAY  ACCOUNTING 

at  too  great  a  price.  It  perverts  the  use  of  commonly  ac- 
cepted accomiting  terminology.  Accounting  rules  which 
necessitate  the  classification  of  insurance  premiums  paid  in 
advance,  for  example,  as  an  unadjusted  debit  rather  than 
as  a  deferred  asset,  are  certainly  unfortunate.  Inasmuch, 
however,  as  the  more  significant  of  the  primary  accounts 
of  which  the  prescribed  balance  sheet  makes  use  are 
grouped  under  the  titles  "Unadjusted  Debits,"  and  "Un- 
adjusted Credits,"  these  titles  will  be  used  in  the  com- 
ments that  follow. 

Unadjusted  Debits.  Unadjusted  debits  cover  four  classes 
of  entries: 

1.  Payments  made  in  advance  of  their  maturity  stand 
for  an  unadjusted  debit,  or,  to  use  a  phrase  which  will  be 
accepted  by  many  as  more  accurate,  a  deferred  asset. 
The  pre-payment  of  an  insurance  premium,  for  example, 
when  property  is  insured  for  three  or  five  years,  would  be 
carried  under  unadjusted  debits.  By  such  a  transaction, 
an  available  asset,  such  as  cash,  has  been  depleted  for  the 
purpose  of  making  a  payment  that  will  not  work  itself 
out  for  three  or  five  years.  Inasmuch  as  one  purpose  of 
the  balance  sheet  is  to  show  the  amount  of  the  accumu- 
lated surplus  for  a  definite  financial  period,  it  is  essential 
that  each  of  the  three  or  five  years  covered  by  the  in- 
surance payment  should  be  made  to  bear  its  proper  pro- 
portion of  this  amount.  An  entry  of  this  sort  on  the 
balance  sheet  shows  that  the  corporation  is  ahead  on  its 
expenditures  just  that  much. 

2.  The  issue  of  securities  at  a  discount  is  a  transaction 
of  the  same  sort,  although  in  this  case  it  is  a  question  of 
credit  rather  than  cash  that  is  involved.  A  bond,  for 
example,  which  sells  for  eighty,  is  entered  on  the  credit 


GENERAL  BALANCE  SHEET  ACCOUNTS    185 

side  of  the  balance  sheet  at  its  face  value.  The  property 
investment  as  a  balance  sheet  offset  to  this  credit  can  be 
but  80%  of  the  par  value  of  the  security.  This  means 
that  a  deficit  appears  on  the  debit  side  of  the  balance 
sheet.  As  a  means  of  obviating  such  a  statement,  the 
management  of  the  corporation  recognizes  the  source  of 
this  deficit  and,  acknowledging  the  necessity  of  ultimately 
bringing  the  property  investment  up  to  the  par  value 
of  the  securities,  enters  the  discount  as  an  unadjusted 
debit  item,  to  be  written  out  of  the  accounts  during  the 
Hfe  of  the  bond.  In  a  sense,  therefore,  this  unadjusted 
item  of  discount  on  securities  sold,  is  a  recognition  that 
the  expansion  of  investments  to  the  par  value  of  securi- 
ties issued  is  a  claim  prior  to  the  claim  of  the  stockholders 
for  dividends.  The  spreading  of  this  claim  over  a  series 
of  years  is  for  the  convenience  of  administration,  and 
should  not  blur  the  fact  that,  according  to  strict  rules  of  ac- 
counting, the  management  is  under  the  necessity  of  placing 
100%  of  property  back  of  100%  of  securities.  Meanwhile, 
the  balance  of  unextinguished  discounts  on  securities  is 
carried  on  the  balance  sheet  as  an  unadjusted  debit  item. 
S.  The  third  class  of  unadjusted  debits  pertains  to 
property  abandoned  when  the  abandonment  is  of  such 
sort,  and  under  such  conditions,  as  to  require  that  it  be 
written  out  of  the  accounts  by  charges  to  operating  ex- 
penses. The  situation  referred  to  has  been  suflSciently 
explained  in  connection  with  the  analysis  of  additions 
and  betterments.  The  reasoning  is  in  general  the  same 
as  that  already  applied  to  discounts  on  securities.  The 
property  account,  at  one  time,  stood  charged  with  a  defi- 
nite piece  of  property  which,  because  of  necessary  changes, 
is  no  longer  used  in  the  service  of  transportation.    This 


186     AMERICAN  RAILWAY  ACCOUNTING 

property,  which  at  first  stood  back  of  securities,  is  now 
abandoned,  and,  except  to  the  amount  of  salvage  involved, 
offers  no  value  for  the  support  of  securities.  This  dissipated 
value  must  be  restored,  and,  until  it  is  restored,  is  properly- 
carried  on  the  balance  sheet  as  an  unadjusted  debit. 

4.  The  fourth  item  of  unadjusted  debits  pertains  to 
securities  issued  or  assumed,  held  in  the  treasury  of  the 
corporation  or  by  its  agents  and  trustees,  whether  pledged 
as  collateral  in  the  issue  of  new  securities  or  unpledged. 

Unadjusted  Credits.  The  discussion  of  unadjusted  credits 
comes  to  be  largely  a  discussion  of  reserves.  Reserves 
are  of  three  kinds, — insurance  and  casualty  reserves,  oper- 
ating reserves,  and  depreciation  reserves. 

1.  The  property  of  operating  railways,  as  also  their 
current  revenues,  is  exposed  to  many  casualties,  for 
which  a  sound  business  management  will  make  adequate 
preparation.  This  means  that  railways  are  obUged  to  pay 
for  many  kinds  of  insurance,  such  as  fire,  fidelity,  boilers, 
casualties,  burglaries,  and  other  risks  to  which  the  prop- 
erty and  surplus  of  a  railway  corporation  are  exposed.  For 
small  properties,  it  is  usually  cheaper  to  provide  against 
these  risks  by  pajTuents  of  premiums  to  regularly  organ- 
ized insurance  companies;  but  in  the  case  of  large  com- 
panies and  great  industries,  it  is  frequently  more  econom- 
ical to  carry  self-insurance. 

This  may  be  done  by  waiting  until  the  casualty  occurs, 
and  then  charging  the  loss  which  it  occasions  directly  to 
operating  expenses.  Such  a  procedure,  however,  would 
not  attain  the  result  desired  when  regarded  as  a  payment 
for  insurance.  Experience  shows  that  fires,  explosions, 
accidents,  and  other  casualties  do  not  occur  with  suSicient 
regularity  and  frequency,  either  to  spread  the  loss  which 


GENERAL  BALANCE  SHEET  ACCOUNTS    187 

they  occasion  equally  between  the  revenues  of  successive 
financial  periods,  or  between  the  different  kinds  of  prop- 
erty or  services  which  should  be  held  liable  for  making 
good  a  particular  loss.  Such  being  the  case,  large  railway 
corporations  not  unfrequently  adopt  the  practice  of  set- 
ting up  insurance  reserves.  These  reserves  are  created 
by  charges  to  operating  expenses  or  by  appropriations 
from  income  or  surplus;  but,  however  created,  this  re- 
serve is  made  chargeable  with  all  accident  or  casualty 
losses  whenever  such  losses  occur.  The  primary  account 
in  the  balance  sheet  entitled  ''Insurance  and  casualty 
reserves"  is  provided  to  carry  the  balance  in  such  re- 
serves on  the  date  of  the  balance  sheet  statement.  It  is 
always  intended  that  this  balance  should  be  a  credit  bal- 
ance, and  for  that  reason  no  account  is  provided  for  a 
corresponding  debit  balance.  Should  it  happen  that  the 
fiscal  period  closes  with  a  debit  balance  in  the  insurance 
account,  it  could  still  be  carried  by  the  account  under  con- 
sideration, but  as  a  minus  credit.  Insurance  and  casualty 
reserves  are  properly  listed  under  unadjusted  credits. 

2.  Operating  reserv^es  are  the  same  in  character  as  in- 
surance reserves.  They  are  created  by  charges  to  op- 
erating expenses  for  certain  classes  of  maintenance  ex- 
penses, for  personal  injuries,  for  payment  of  loss  and 
damage  claims,  and  for  other  similar  purposes.  Charges 
designed  to  raise  reserves  of  this  class  are  made  regularly, 
from  week  to  week  or  from  month  to  month,  the  purpose 
being  to  equalize  the  burden  of  payments  as  between  the 
several  periods  recognized  by  the  accounts. 

Operating  reserves  should  never  show  a  large  credit 
balance  at  the  close  of  a  fiscal  period.  Such  a  balance 
would  indicate  that  the  charges  to  operating  expenses 


188     AMERICAN  RAILWAY  ACCOUNTING 

for  the  purpose  of  creating  such  reserves  had  been  excessive, 
and,  consequently,  that  the  current  statement  of  net  reve- 
nues from  operations  had  been  understated.  This  is  an 
illustration  of  the  necessity  of  looking  beyond  net  revenues 
to  the  balance  sheet  entries,  in  order  to  determine  whether 
or  not  current  net  revenues  have  been  properly  stated. 

3.  Depreciation  Reserves.  Depreciation  reserves  are 
created  by  current  maintenance  charges  to  operating 
expenses.  They  are  a  charge  for  maintenance  over  and 
above  charges  made  for  current  repairs.  It  measures, 
provided  the  accounts  are  accurately  kept,  the  dissipation 
of  assets  which  can  only  be  restored  at  the  time  of  the 
replacement  of  the  units  of  the  property  which,  in  the 
course  of  operation,  are  retired.  A  large  and  constantly 
increasing  balance  in  these  accounts  would  indicate  that 
the  rate  of  depreciation  charged  in  previous  years  had 
been  too  high.  In  applying  this  rule,  also,  it  should  be 
held  in  mind  that  railway  property  may  be  operated  at 
the  maximum  of  safety  and  efficiency  on  about  80%  of  its 
original  cost.  This  point  has  already  been  considered  in 
the  discussion  of  operating  expenses.  The  point  of  present 
importance  is,  that  the  current  balance  in  the  depreciation 
accounts  might  stand  permanently  at  20%  of  the  original 
cost  of  the  property,  without  proving  that  previous 
charges  for  depreciation  had  been  too  high.  As  already 
observed,  the  difference  between  the  balance  in  these 
depreciation  accounts  recorded  on  the  balance  sheet,  and 
the  charges  to  the  property  accounts  for  the  same  class  of 
property,  will  disclose  the  depreciated  value  of  the  prop- 
erty as  used  in  the  service  of  transportation. 

§  55.  The  Corporate  Surplus.— The  final  test  of  a 
well  constructed  and  a  well  administered    accounting 


GENERAL  BALANCE  SHEET  ACCOUNTS  189 

system,  is  found  in  the  ease  and  certainty  with  which  a 
corporate  surplus  may  be  determined  and  analyzed.  This 
figure  is  cumulative  from  year  to  year.  It  stands  for  the 
aggregate  undivided  profit  which  accrues  to  the  busi- 
ness from  its  inception  to  the  date  of  the  balance  sheet. 

In  the  first  place,  it  should  be  recognized  that  a  surplus 
does  not  necessarily  mean  cash  on  hand,  or  the  holding  of 
quick  or  convertible  assets.  The  surplus,  or  rather  the 
asset  that  stands  for  the  surplus,  must,  at  some  time  in  the 
history  of  the  property,  have  passed  through  the  cash 
account;  but  to  the  extent  that  cash  has  been  used  for 
the  betterment  of  the  business,  or  for  the  execution  of  an 
agreement  with  itself,  it  may  be  said  to  exist  as  a  corpora- 
tion investment  in  the  property.  This  being  the  case, 
the  first  step  in  the  analysis  of  an  accumulated  surplus 
must  be  to  separate  convertible  from  inconvertible  assets, 
so  far  as  they  are  an  offset  to  the  surplus;  or,  to  express 
this  in  another  way,  to  separate  the  accumulated  surplus 
into  appropriated  and  unappropriated  surplus. 

Provision  for  this  separation  is  made  in  the  standard 
balance  sheet  by  means  of  six  primary  accounts  under  the 
general  account  ''Corporate  Surplus.'^  The  balance  sheet 
statement  stands  as  follows: 

Corporate  Surplus 

779.  Additions  to  property  through  income  and  surplus. 

780.  Funded  debt  retired. 

781.  Sinking  fund  reserves. 

^  782.  Miscellaneous  fund  reserves. 

783.  Appropriated  surplus  not  specially  invested. 

Total  appropriated  surplus. 

784.  Profit  and  loss — Balance. 

Total  corporate  surplus. 


190     AMERICAN  RAILWAY  ACCOUNTING 

Primary  accounts  779  and  780  stand  for  the  amount 
of  betterments  to  the  property  through  the  use  made 
from  year  to  year  of  the  current  surplus.  The  first  named 
has  to  do  with  physical  betterments,  and  the  last  to 
financial  betterments.  These  are  in  no  sense  contractual 
appropriations.  The  Board  of  Directors,  had  it  so  chosen, 
might  have  distributed  the  surplus  as  a  dividend  to  the 
stockholders,  in  which  case  it  would  have  been  necessary 
to  sell  new  stock  or  issue  new  bonds  to  secure  the  funds 
for  making  the  improvements.  The  fact  of  accounting 
significance  is  that  the  assets,  whether  physical  or  financial, 
for  which  the  balance  in  these  two  accounts  stands,  may 
be  traced  through  charges  to  income,  made  concurrently 
with  credits  to  these  accounts.  In  the  case  of  additions 
to  property,  for  example,  primary  account  779,  the  cor- 
responding charges  will  be  found  in  primary  accounts  554 
or  615.  It  thus  becomes  clear  that  the  meaning  of  the 
appropriated  surplus  is  to  be  found  in  the  assets  by  which 
it  is  offset,  and  that  the  character  of  the  assets  is  to  be 
read  from  the  charges  to  income  or  profit  and  loss  made 
at  the  time  the  assets  were  created.  Those  assets  which 
stand  against  the  appropriated  surplus  may  be  as  fixed, 
and  as  incapable  of  conversion  into  current  funds,  as  those 
which  stand  back  of  capital  liabilities  in  the  form  of  stocks 
or  bonds. 

Sinking  fund  reserves  call  for  no  special  explanation. 
They  cover  all  credits  for  appropriations  of  this  class, 
whether  held  in  general  funds  or  specially  set  aside  in  the 
hands  of  trustees.  Credits  for  this  purpose  are  made  con- 
currently with  the  changes  that  follow  the  appropriation 
of  accruals  in  favor  of  the  fund.  The  point  is,  that  for 
the  analysis  of  this  balance,  one  must  turn  to  the  cor- 


GENERAL  BALANCE  SHEET  ACCOUNTS    191 

responding  debit  entries  to  be  found  in  the  income 
account. 

The  last  two  of  the  accounts  that  together  cover  the 
appropriated  surplus,  pertain  to  miscellaneous  transac- 
tions. The  distinction  between  them  is,  that  the  second 
of  these  primary  accounts  covers  credits  "for  which  no 
specific  investment  or  segregation  of  assets  has  been 
made."  To  the  amount  of  the  balance  that  at  any  time 
stands  to  the  credit  of  this  account,  it  is  recognized  that 
the  corporation  has  assets  that  cannot  readily  be  identified. 
The  appropriated  surplus  is  in  excess  of  the  surplus  that 
can  be  readily  traced.  They  are  "somewhere  in  the  prop- 
erty," but  are  of  such  a  sort  that  they  are  not  available 
for  dividends.  It  may  perhaps  be  necessary  to  make 
provision  for  transactions  of  this  sort;  but,  if  so,  the 
amount  carried  should  be  as  small  as  possible.  A  large 
amount  of  assets  that  can  not  be  segregated  through  the 
record  of  the  growth  of  the  accumulated  surplus,  like 
large  suspense  accounts  extending  over  long  periods, 
raises  the  suspicion  of  slipshod  accounting. 

That  portion  of  the  accumulated  surplus  not  covered 
by  appropriations  must  be  balanced  by  quick  assets  or  by 
cash.  If,  upon  examination,  it  is  found  that  this  is  not  the 
case,  the  ability  of  the  accoimtant  nday  properly  be  called 
in  question. 

The  railway  accountant  has  not  always  been  held 
responsible  for  an  analysis  of  the  surplus.  Not  many 
years  ago,  it  was  the  common  practice  of  American  rail- 
ways to  charge  additions  and  betterments,  and  similar 
improvements,  to  operating  expenses.  The  result  of  such 
incomplete  entries  was  to  create  a  secret  reserve;  that 
is  to  say,  an  Eisset  would  be  created,  built  out  of  current 


192     AMERICAN  RAILWAY  ACCOUNTING 

profits,  for  which  the  business  failed  to  take  credit.  This 
practice  was  changed  by  the  revision  of  the  accounts  in 
1907  and  1908.  With  that  change  the  analysis  of  the 
surplus  forced  itself  on  the  attention  of  railway  account- 
ants. The  situation  has  been  greatly  improved,  but  much 
remains  yet  to  be  done  before  one  can  gain  from  the  records 
the  correct  meaning  of  the  accumulated  surplus. 


APPENDIX  A 

CLASSIFICATION  OF  INVESTMENT  IN  ROAD 
AND  EQUIPMENT.    ISSUE  OF  1914 


GENERAL  INSTRUCTIONS 

Page 

1.  Accounts  for  investmont  in  road  and  equipment 196 

2.  Items  to  be  charged 196 

3.  Basis  of  charges 198 

4.  Cost  of  construction 199 

5.  Excavated  material 202 

6.  Items  to  be  credited 202 

7.  Property  retired  and  replaced 202 

8.  Property  retired  and  not  replaced 203 

9.  Equipment  retired 204 

10.  Land  retired 204 

IL  Adjustments  for  converted  property 204 

12.  Expenses  in  connection  with  additions  and  betterments  205 

13.  Interpretation  of  item  lists 205 

14.  Submission  of  questions 206 

GENERAL  ACCOUNTS 

I.  Road 206 

II.  Equipment 234 

III.   GENERA.L  EXPENDITURES 241 

PRIMARY  ACCOUNTS 
I.  Road — 

1.  Engineering 206 

2.  Land  for  transportation  purposes 208 

3.  Grading 209 

4.  Underground  power  tubes 209 

193 


194  APPENDIX  A 

I.  Road — Continued  Page 

5.  Tunnels  and  subways 210 

6.  Bridges,  trestles,  and  culverts 210 

7.  Elevated  structures 211 

8.  Ties 211 

9.  Rails 212 

10.  Other  track  material 212 

11.  Ballast 213 

12.  Track  laying  and  surfacing 214 

13.  Right-of-way  fences 214 

14.  Snow  and  sand  fences  and  snowsheds 214 

15.  Crossings  and  signs 215 

16.  Station  and  office  buildings 216 

17.  Roadway  buildings 217 

18.  Water  stations 217 

19.  Fuel  stations 218 

20.  Shops  and  enginehouses 219 

21.  Grain  elevators 220 

22.  Storage  warehouses 221 

23.  Wharves  and  docks 221 

24.  Coal  and  ore  wharves 222 

25.  Gas  producing  plants 222 

26.  Telegraph  and  telephone  lines 222 

27.  Signals  and  interlockers 223 

28.  Power  dams,  canals,  and  pipe  lines 224 

29.  Power  plant  buildings 224 

30.  Power  substation  buildings 225 

31.  Power  transmission  systems 225 

32.  Power  distribution  systems 226 

33.  Power  line  poles  and  fixtures 226 

34.  Underground  conduits 227 

35.  Miscellaneous  structures 227 

36.  Paving 227 

37.  Roadway  machines 227 

38.  Roadway  small  tools 228 

39.  Assessments  for  public  improvements 229 

40.  Revenues  and  operating  expenses  during  con- 

struction   229 


APPENDIX  A  195 

I.  Road — Continued  Page 

41.  Cost  of  road  purchased 230 

42.  Reconstruction  of  road  purchased 231 

43.  Other  expenditures — Road 231 

44.  Shop  machinery 231 

45.  Power  plant  machinery 232 

46.  Power  substation  apparatus 233 

47.  Unapplied  construction  material  and  supplies  . .  234 
II.  Equipment — 

51.  Steam  locomotives 236 

52.  Other  locomotives 236 

53.  Freight-train  cars 237 

54.  Passenger-train  cars 237 

55.  Motor  equipment  of  cars 23S 

56.  Floating  equipment 239 

57.  Work  equipment 240 

58.  Miscellaneous  equipment 241 

III.  General  expenditures — 

71.  Organization  expenses 241 

72.  General  officers  and  clerks 242 

73.  Law 242 

74.  Stationery  and  printing .  .  ; 242 

75.  Taxes 244 

76.  Interest  during  construction 244 

77.  Other  expenditures — General 245 

GENERAL  INSTRUCTIONS 

The  carrier's  records  shall  be  kept  with  sufficient  par- 
ticularity to  show  fully  the  facts  pertaining  to  all  entries 
made  in  the  accounts  provided  herein  for  investment  in 
road  and  equipment.  Where  the  full  information  is  not 
recorded  in  the  general  books,  the  entries  therein  shall  be 
supported  by  other  records  in  which  the  full  details  shall 
be  shown.  Such  general  book  entries  shall  contain  suf- 
ficient reference  to  the  detail  records  to  permit  ready 
identification,  and  the  detail  records  shall  be  filed  in  such 


196  APPENDIX  A 

manner  as  to  be  readily  accessible  for  examination  by 
representatives  of  the  Interstate  Commerce  Commission. 

1.  Accounts  for  Investment  in  Road  and  Equipment. — 
The  accounts  prescribed  in  this  classification  are  designed  to 
show  the  investment  of  the  carrier  in  property  devoted  to  trans- 
portation service.  The  carrier's  investment  in  physical  property 
other  than  transportation  property  is  provided  for  in  balance- 
sheet  account  No.  705,  "Miscellaneous  physical  property." 
The  carrier  means  the  accounting  carrier,  except  when  otherwise 
specifically  indicated.  The  carrier's  records  shall  be  kept  in 
such  form  that  expenditures  for  additions  and  betterments  may 
be  reported  separately  from  those  for  original  road,  original 
equipment,  and  road  extensions,  and  shall  show  separately  the 
expenditures  under  each  authorized  addition  and  betterment 
project.  (See  balance-sheet  account  No.  701,  ''Investment  in 
road  and  equipment,"  and  No.  702,  "Improvements  on  leased 
railway  property.") 

2.  Items  to  be  Charged. — ^To  these  accounts  shall  be  charged 
the  cost  of  original  road,  original  equipment,  road  extensions, 
additions,  and  betterments;  also  the  estimated  values  at  time 
of  acquisition  of  right  of  way  and  other  road  and  equipment  prop- 
erty donated  to  the  carrier,  except  that  unless  authorized  by  the 
Commission  no  charges  shall  be  made  to  these  accounts  after 
July  1,  1914,  for  donations  received  previously  to  that  date. 
Applications  to  the  Commission  for  including  such  items  in  the 
road  and  equipment  accounts  shall  contain  full  information 
concerning  the  source  and  character  of  the  donations. 

If  the  total  cost  of  additions  and  betterments  to  any  class  of 
equipment,  or  any  class  of  fixed  improvements  (except  tracks), 
under  a  general  plan,  considered  as  a  whole,  is  less  than  $200, 
the  option  may  be  exercised  of  charging  the  amount  expended 
to  the  appropriate  account  in  Operating  Expenses.  This  rule 
is  not  to  be  construed  as  authorizing  the  parcehng  of  expendi- 
tures in  order  to  bring  them  within  this  limit. 

Construction  includes  all  processes  connected  with  the  ac- 
quisition and  construction  of  original  road  and  equipment,  road 
extensions,  additions,  and  betterments. 


APPENDIX  A  197 

Original  road  means  the  land  and  fixed  improvements  pro- 
vided and  arranged  for  in  the  original  plan  for  the  construction 
of  a  new  road.  When  the  acquisition  of  any  such  fixed  improve- 
ments under  the  original  plan  is  deferred,  such  improvements, 
when  acquired,  shall  be  considered  as  additions.  Original  road 
shall  not  be  construed  to  include  fixed  improvements  which 
under  the  original  plans  for  the  road,  it  is  proposed  to  substitute 
at  some  time  subsequent  to  the  beginning  of  commercial  opera- 
tions for  the  improvements  originally  installed  and  used  for  trans- 
portation operations,  such  as  steel  bridges  substituted  for  trestles. 

Original  equipment  means  equipment  provided  and  arranged 
for  under  the  original  plan  for  the  construction  of  a  new  road. 
When  the  acquisition  of  such  equipment  under  the  original  plan 
is  deferred,  such  equipment,  when  acquired,  shall  be  considered 
as  additions. 

Road  extensions  mean  the  land  and  fixed  improvements  pro- 
vided and  arranged  for  in  the  original  plan  for  the  construction 
of  extensions  of  existing  main  fines,  additional  branch  lines, 
and  extensions  of  existing  branch  lines.  When  the  acquisition 
of  any  such  fixed  improvements  under  the  original  plan  is  de- 
ferred, such  improvements,  when  acquired,  shall  be  treated  as 
additions.  Road  extensions  shall  not  be  construed  to  include 
fixed  improvements  which  under  the  original  plans  for  the  ex- 
tensions it  is  proposed  to  substitute,  at  some  time  subsequent 
to  the  beginning  of  commercial  operations,  for  the  improvements 
originally  installed  and  used  for  transportation  in  connection 
with  conmiercial  operations,  such  as  steel  bridges  substituted  for 
trestles. 

Equipment  means  the  rolling  stock,  boats,  highway  vehicles, 
horses,  and  harness  devoted  to  transportation  service,  the  cost 
of  which  is  includible  in  the  equipment  accounts. 

Fixed  improvements  means  structures  which  are  fixed  as  to 
location,  such  as  tunnels,  bridges,  buildings,  earthworks,  etc. 

Additions  are  additional  facilities,  such  as  additional  equip- 
ment, tracks  (including  timber  and  mine  tracks),  buildings, 
bridges,  and  other  structures;  additions  to  such  faciUties,  such 
as  extensions  to  tracks,  buildings,  and  other  structures;  addi- 
tional ties  laid  in  existing  tracks;  and  additional  devices  applied 


198  APPENDIX  A 

to  facilities,  such  as  air  brakes  applied  to  cars  not  previously 
thus  equipped.  When  property,  such  as  a  section  of  road,  track, 
unit  of  equipment,  shop  or  power  plant  machine,  building,  or 
other  structure,  is  retired  from  service  and  replaced  with  prop- 
erty of  like  purpose,  the  newly  acquired  property  shall,  for  the 
purpose  of  this  classification,  be  considered  as  an  addition,  and 
the  cost  thereof  accounted  for  accordingly.  (See  section  7.) 
If,  however,  the  property  retired  and  replaced  is  of  minor  im- 
portance, such  as  a  small  roadway  building  or  other  structure, 
and  is  replaced  in  kind  without  betterment,  the  cost  of  the  re- 
placement shall  be  charged  to  Operating  Expenses,  and  no 
adjustment  made  in  the  road  and  equipment  accounts. 

Betterments  are  improvements  of  existing  faciUties  through 
the  substitution  of  superior  parts  for  inferior  parts  retired,  such 
as  the  substitution  of  steel-tired  wheels  for  cast  wheels  under 
equipment,  the  application  of  heavier  rail  in  tracks,  and  the 
strengthening  of  bridges  by  the  substitution  of  heavier  mem- 
bers. The  cost  chargeable  to  the  accounts  of  this  classification 
is  the  excess  cost  of  new  parts  over  the  cost  at  current  prices  of 
new  parts  of  the  kind  retired.    (See  section  12.) 

Costs  shall  be  actual  money  costs  to  the  carrier.  Where  a 
portion  of  the  funds  expended  by  the  carrier  has  been  obtained 
through  donations  by  States,  municipalities,  individuals,  or 
others,  no  deductions  on  account  of  such  donations  shall  be 
made  in  stating  the  costs.  Contributions  for  joint  expenditures 
should  not  be  considered  as  donations.  The  carrier's  proportion 
only  of  the  cost  of  joint  projects,  such  as  construction  of  jointly 
owned  tracks  and  ehmination  of  highway  crossings  at  joint  ex- 
pense, shall  be  included  in  these  accounts. 

3.  Basis  of  Charges. — ^The  charges  to  the  accounts  of  this 
classification  shall  be  based  upon  the  cost  of  the  property  ac- 
quired. When  the  consideration  given  for  the  purchase  or  the 
improvement  of  property  the  cost  of  which  is  chargeable  to  the 
accounts  of  this  classification  is  other  than  money,  the  money 
value  of  the  consideration  at  the  time  of  the  transaction  shall 
be  charged  to  these  accounts,  and  the  actual  consideration  shall 
be  described  in  the  record  in  sufficient  detail  to  identify  it. 
The  carrier  shall  be  prepared  to  furnish  the  Commission,  upon 


APPENDIX  A  199 

demand,. the  particulars  of  its  determination  of  the  actual  cash 
value  of  the  consideration,  if  other  than  money. 

4.  Cost  of  Construction. — It  is  intended  that  the  accounts 
for  fixed  improvements  and  equipment  shall  include  the  cost  of 
construction  of  such  property.  The  cost  of  construction  shall 
include  the  cost  of  labor,  materials  and  supplies,  work-train 
service,  special  macliine  service,  transportation,  contract  work, 
protection  from  casualties,  injuries  and  damages,  privileges,  and 
other  analogous  elements  in  connection  with  such  work.  The 
several  items  of  cost  here  referred  to  are  defined  as  follows: 

(a)  Cost  of  labor  includes  the  amount  paid  for  labor  expended 
by  the  carrier's  owti  employees,  including  the  cost  of  labor  ex- 
pended for  preliminary  work,  such  as  sinking  test  holes  or  mak- 
ing soundings  for  tunnels,  grading,  buildings,  and  other  struc- 
tures; and  cost  of  labor  expended  in  laying  and  taking  up  tracks 
for  temporary  use  in  construction,  except  the  cost  of  labor  ex- 
pended on  tracks  provided  for  the  protection  of  traffic  during 
the  progress  of  addition  and  betterment  work.  Office  expenses 
and  traveling  and  other  personal  expenses  of  employees,  when 
borne  by  the  carrier,  shall  be  considered  a  part  of  the  cost  of  the 
labor,  as  shall  also  the  cost  of  fidelity  bonds  and  employers' 
liability  insurance  premiums.  When  officers  or  employees  are 
specially  assigned  to  construction  work,  their  pay  and  their 
traveling  and  incidental  expenses  while  thus  engaged  shall  be 
included  in  the  cost  of  the  work.  No  charge  shall  be  made 
against  road  and  equipment  accounts  for  the  pay  of  officers  who 
merely  render  services  incidentally  in  connection  with  exten- 
sions, additions,  or  betterments,  although  traveling  and  inci- 
dental expenses  incurred  by  such  officers  solely  on  account  of 
such  work  shall  be  included  in  the  account  to  which  the  cost  of 
the  work  is  chargeable. 

(6)  Cost  of  materials  and  supplies  includes  the  purchase  price 
of  materials  and  supplies,  including  small  tools,  at  the  point  of 
free  dehvery,  plus  the  costs  of  inspection  and  loading  assumed  by 
the  carrier;  also  a  suitable  proportion  of  store  expenses.  (See 
special  instructions  for  operating  expense  accounts,  sections  16 
and  17.)  In  calculating  the  cost  of  materials  used,  proper  al- 
lowance shall  be  made  for  the  value  of  unused  portions  and  of 


200  APPENDIX  A 

cuttings,  turnings,  borings,  etc.;  for  the  value  of  the  material 
recovered  from  temporary  tracks,  scaffolding,  cofferdams,  and 
other  temporary  structures  used  in  construction;  and  for  the 
value  of  small  tools  recovered  and  used  for  other  purposes. 

(c)  Cost  of  work-train  service  includes  amounts  paid  to  others 
for  rent  and  maintenance  of  the  equipment  used;  cost  of  labor 
of  enginemen,  trainmen,  and  enginehouse  men,  including  the 
wages  of  engine  crews  and  train  crews  held  in  readiness  for  such 
service;  and  the  cost  of  fuel  and  other  supphes  consumed  in 
connection  with  the  operation  of  work  trains.  It  shall  also  in- 
clude the  cost  of  maintaining  the  carrier's  own  equipment  while 
used  in  construction  service  and  a  fair  rent  for  such  equipment 
while  so  used.  Amounts  charged  for  rent  of  such  equipment 
used  in  construction  shall  concurrently  be  credited  to  the  ap- 
propriate income  account  for  hire  of  equipment.  No  "rent" 
or  return  upon  the  investment  in  such  equipment  shall  be  charged 
for  the  use  of  equipment  acquired  with  the  proceeds  of  securities 
sold,  when  the  interest  upon  such  securities  is  charged  to  the 
accounts  of  this  classification. 

(d)  Cost  of  special  machine  service  includes  the  cost  of  labor 
expended  and  of  materials  and  supplies  consumed  in  maintain- 
ing and  operating  steam  shovels,  scrapers,  rail  unloaders,  ballast 
unloaders,  pile  drivers,  dredges,  ditchers,  weed  burners,  and 
other  labor-saving  machines;  also  rents  paid  for  use  of  such 
machines.  (See  Note  A  under  account  No.  37,  "Roadway  ma- 
chines," and  text  of  general  account  II,  Equipment,  seventh 
paragraph.) 

(e)  Cost  of  transportation  includes  the  amounts  paid  to  other 
companies  or  individuals  for  the  transportation  of  men,  ma- 
terials and  supplies,  special  machine  outfits,  appliances,  and 
tools  in  connection  with  construction.  Freight  charges  paid 
foreign  lines  for  the  transportation  of  construction  material  to 
the  carrier's  line  shall  be  included,  so  far  as  practicable,  as  a 
part  of  the  cost  of  the  material,  when  such  charges  are  borne  by 
the  carrier.  A  fair  allowance  representing  the  expense  to  the 
carrier  of  such  transportation  in  transportation  service  trains 
over  the  carrier's  own  line  also  shall  be  included.  When  the 
cost  of  such  transportation  is  not  assignable  to  specific  work,  it 


APPENDIX  A  201 

shall  be  included  in  account  No.  43,  "Other  expenditures — 
Road."  Amounts  thus  charged  for  transportation  in  trans- 
portation service  trains  over  the  carrier's  line  shall  be  credited  to 
operating  expense  general  account  VIII,  Transportation  for 
Investment — Cr. 

(/)  Cost  of  contract  work  includes  amounts  paid  for  work  per- 
formed under  contract  by  other  companies,  firms,  or  individuals, 
and  costs  incident  to  the  award  of  the  contract. 

{g)  Cost  of  protection  from  casualties  includes  expenditures 
for  protection  against  fire,  such  as  payments  for  discovery  or 
extinguishment  of  fires,  cost  of  detecting  and  prosecuting  incen- 
diaries, witness  fees  in  relation  thereto,  amounts  paid  to  mu- 
nicipal corporations  and  others  for  fire  protection,  and  other 
analogous  items  of  expenditure  in  connection  with  construction 
work. 

Qi)  Cost  of  injuries  and  damages  includes  expenditures  on 
account  of  injuries  to  persons  or  damage  to  property  when  in- 
cident to  construction  projects,  and  shall  be  included  in  the 
cost  of  the  work  in  connection  with  which  the  injury  or  damage 
occurs.  It  also  includes  that  portion  of  premiums  paid  for  in- 
suring property  appUcable  to  the  period  prior  to  the  completion 
or  coming  into  service  of  the  property  insured.  Insurance  re- 
covered on  account  of  compensation  paid  for  injuries  to  persons 
incident  to  construction  shall  be  credited  to  the  accounts  to 
which  such  compensation  is  charged,  and  insurance  recovered 
on  account  of  damages  to  property  incident  to  construction 
shall  be  credited  to  the  accounts  chargeable  with  the  expendi- 
tures necessary  for  restoring  the  damaged  property.  The  cost 
of  injuries  and  damages  incident  to  the  removal  of  old  struc- 
tures, or  parts  thereof,  shall  be  charged  to  Operating  Expenses 
or  Profit  and  Loss,  as  may  be  appropriate,  except  that  such 
costs  in  connection  with  the  removal  of  old  structures  which 
are  incumbrances  on  newly  acquired  lands  shall  be  included  in 
account  No.  2,  "Land  for  transportation  purposes,"  or  No.  3, 
"Grading,"  as  may  be  appropriate.    (See  sections  7  and  8.) 

(i)  Cost  of  privileges  includes  compensation  for  temporary- 
privileges,  such  as  the  use  of  public  property  or  streets,  in  con- 
nection with  the  construction  of  the  property  of  the  carrier. 


202  APPENDIX  A 

5.  Excavated  Material. — ^The  cost  of  disposing  of  material 
excavated  in  connection  with  construction  shall  be  considered 
as  a  part  of  the  cost  of  the  work,  except  that  when  such  material 
is  used  for  fiUing,  the  cost  of  removal  and  dumping  shall  be 
equitably  apportioned  between  the  work  in  connection  with 
which  the  removal  occurs  and  the  work  in  connection  with 
which  the  material  is  used. 

6.  Items  to  be  Credited. — ^To  these  accounts  shall  be  credited 
the  ledger  value  of  property  retired. 

Ledger  value  of  property  is  the  value  at  which  the  property  is 
carried  in  the  property  investment  account  in  the  general  ledger 
of  the  carrier.  In  case  the  value  of  any  item  of  property  is  not 
shown  separately  in  the  ledger  the  ledger  value  of  that  item 
shall  be  its  proportionate  share  of  the  value  of  the  entire  group 
in  which  the  particular  property  is  included. 

Property  retired  means  property  which  is  sold,  abandoned, 
demolished,  or  otherwise  withdrawn  from  transportation  service. 

Salvage  from  retired  property  is  the  value  of  material  recovered 
from  property  retired.  When  such  material  is  retained  and 
again  used  by  the  carrier,  the  value  shall  be  computed  upon  the 
basis  of  fair  prices  for  the  material  in  its  condition  as  recovered. 
When  such  material  is  sold,  the  net  proceeds  of  the  sale  shall  be 
considered  as  the  value  of  the  material. 

7.  Property  Retired  and  Replaced. — When  a  unit  of  prop- 
erty other  than  land  or  equipment — such  as  a  section  of  road, 
side  or  yard  track,  shop  or  power  plant  machine,  building,  or 
other  structure — ^is  retired  from  service  and  replaced  with  prop- 
erty of  like  purix)se,  the  ledger  value  of  the  retired  property 
shall  be  credited  to  the  appropriate  accounts  of  this  classifica- 
tion at  the  time  that  the  property  is  retired  from  service. 
The  amount  of  this  credit  shall  be  charged  concurrently  as 
follows: 

An  amount  equal  to  the  credit  balance  in  the  accrued  depre- 
ciation balance-sheet  account  with  respect  to  the  property 
thus  retired  shall  be  charged  to  that  account  and  the  remainder 
(less  salvage  and  insurance  recovered,  if  any),  together  with  the 
cost  of  demolishing  the  property,  if  demolished  by  or  for  the 
carrier,  shall  be  charged  to  the  accounts  in  Operating  Expenses 


APPENDIX  A  203 

appropriate  for  the  cost  of  repairs  of  the  property  before  retire- 
ment. The  accounting  for  the  salvage  shall  be  in  accordance 
with  the  disposition  made  of  the  material  recovered. 

If,  however,  the  property  retired  and  replaced  with  property 
of  like  purpose  is  of  minor  importance,  such  as  a  small  roadway 
building  or  other  small  structure,  and  is  replaced  in  kind  with- 
out betterment,  the  cost  of  the  replacement  shall  be  charged 
to  operating  expense  accounts,  and  no  adjustment  made  in  the 
road  and  equipment  accounts. 

If  so  authorized  by  the  Interstate  Commerce  Commission, 
the  carrier  may  charge  to  Profit  and  Loss  any  extraordinarily 
large  item  representing  the  cost  of  property  retired  and  replaced, 
instead  of  charging  such  item  to  Operating  Expenses.  The 
carrier  shall  file  with  the  Commission  a  statement  of  the  cost 
and  a  description  of  the  property  retired  and  the  reasons  which, 
in  its  judgment,  indicate  the  propriety  of  charging  the  cost  of 
such  property  to  Profit  and  Loss. 

The  provisions  of  this  section  are  applicable  in  accounting  (at 
the  time  of  retirement)  for  the  cost  of  property  abandoned, 
even  though  the  new  property  has  been  actually  installed  pre- 
viously to  the  date  of  the  demolishment  of  the  abandoned  prop- 
erty. 

When  the  renewals  to  be  made  to  an  important  building  or 
other  structure  will  constitute  the  major  portion  of  its  value 
when  renewed,  the  property,  when  taken  out  of  service,  shall 
be  considered  as  retired  and  accounted  for  as  provided  above, 
and  for  the  purposes  of  this  classification  the  renewed  property 
shall  be  considered  as  an  addition,  and  the  appraised  cost  thereof 
shall  be  included  in  the  accounts  of  this  classification,  considera- 
tion being  given  to  the  secondhand  portions  remaining  therein. 
In  no  case  shall  the  charge  for  the  renewed  property  exceed  the 
cost  (at  current  market  prices  of  labor  and  material)  of  new 
property  of  equal  capacity  and  equal  expectation  of  life  in  serv- 
ice, less  a  suitable  allowance  on  account  of  the  secondhand 
parts  remaining  therein. 

8.  Property  Retired  and  not  Replaced. — ^When  a  unit  of 
property  other  than  land  or  equipment — such  as  a  section  of 
road,  side  or  yard  track,  shop  or  power  plant  machine,  building, 


204  APPENDIX  A 

or  other  structure — ^is  retired  from  service  and  not  replaced,  the 
ledger  value  shall  be  credited  to  the  appropriate  property  ac- 
counts at  the  time  that  the  property  is  retired  from  service. 
The  amount  of  this  credit  shall  be  concurrently  charged  as 
follows: 

An  amount  equal  to  the  credit  balance  in  the  accrued  depre- 
ciation balance-sheet  account  with  respect  to  the  property  thus 
retired  shall  be  charged  to  that  account,  and  the  remainder  (less 
salvage  and  insurance  recovered,  if  any),  together  with  the 
cost  of  demolishing  the  property  if  demolished  by  or  for  the  ac- 
count of  the  carrier,  shall  be  charged  to  the  appropriate  profit 
and  loss  account.  The  accounting  for  the  salvage  shall  be  in 
accordance  with  the  disposition  made  of  the  material  re- 
covered. 

9.  Equipment  Retired. — The  instructions  for  accounting 
for  equipment  retired  are  contained  in  the  text  of  the  general 
account  II,  Equipment. 

10.  Land  Retired. — When  any  land,  the  cost  of  which  is 
included  in  the  accounts  of  this  classification,  is  retired,  the 
ledger  value  shall  be  credited  to  account  No.  2,  "Land  for  trans- 
portation purposes."  If  the  land  is  retained  by  the  carrier,  its 
estimated  value  shall  be  charged  to  balance-sheet  account  No. 
705,  "Miscellaneous  physical  property,"  the  necessary  adjust- 
ment of  the  difference  between  the  ledger  value  and  the  esti- 
mated value  on  account  of  the  loss  in  the  property  due  to  its 
retirement  from  transportation  service  shall  be  made  through 
Profit  and  Loss.  If  sold,  the  difference  between  the  ledger  value 
credited  to  account  No.  2  and  the  amount  received  for  the  land 
shall  be  adjusted  in  Profit  and  Loss. 

11.  Adjustments  for  Converted  Property. — When  prop- 
erty, such  as  a  unit  of  equipment,  a  building,  or  other  faciUty  of 
one  class,  is  converted  into  property  of  another  class,  so  that 
the  amount  of  investment  in  such  property  must  be  transferred 
from  one  account  of  this  classification  to  another,  the  ledger 
value  shall  be  credited  to  the  appropriate  road  and  equipment 
account.  Proper  account  shall  be  taken  of  any  salvage  recovered 
in  the  process  of  conversion.  The  amount  of  the  balance  in  the 
accrued  depreciation  balance-sheet  account,  with  respect  to 


APPENDIX  A  205 

the  property  thus  converted,  shall  be  charged  to  that  account 
The  appraised  cost  of  the  property  converted  (consideration 
being  given  to  the  secondhand  portions  remaining  therein)  shall 
be  included  in  the  appropriate  account  of  this  classification. 
The  charge  for  the  converted  property  in  no  case  shall  exceed 
the  cost  (at  current  market  prices  of  labor  and  material)  of  new- 
property  of  equal  capacity  and  equal  exjDectation  of  life  in  serv- 
ice, less  a  suitable  allowance  on  account  of  the  secondhand 
portions  remaining  therein.  The  ledger  value  of  the  property 
before  conversion,  plus  the  cost  of  conversion,  less  the  sum  of 
the  estimated  value  of  the  property  as  converted,  the  amounts 
charged  to  accrued  depreciation  accounts,  and  the  salvage  re- 
covered, shall  be  charged  to  the  operating  expense  accounts  ap- 
propriate for  the  costs  of  repairs  of  the  fixed  improvements  or 
for  the  retirement  of  equipment  before  conversion. 

12.  Expenses  in  Connection  with  Additions  and  Better- 
ments.— ^The  cost  of  removing  old  material  from  equipment 
and  from  buildings,  bridges,  wharves,  tracks,  and  other  fixed 
improvements,  shall  be  charged  to  the  appropriate  operating 
expense  accounts.  Such  charges  shall  include  the  cost  of  remov- 
ing old  foundations  and  filling  old  excavations,  and  restoring 
condition  of  grounds  after  addition  and  betterment  work;  re- 
arranging or  relocating  existing  tracks;  relocating  telegraph  and 
telephone  poles  or  lines,  fences,  track  and  other  signals,  build- 
ings, bridges,  trestles,  culverts,  and  other  structures,  and  farm 
and  highway  crossings,  including  crossing  gates  and  alarms, 
when  the  provisions  of  section  8  of  these  instructions  are  not 
appHcable;  and  maintaining  or  protecting  traffic  during  the 
progress  of  addition  and  betterment  work,  including  the  cost  of 
constructing,  maintaining,  and  removing  temporary  tracks 
required  for  maintaining  traffic  during  the  progress  of  the 
work. 

13.  Interpretation  of  Item  Lists. — Lists  of  "items,'* 
** details,"  etc.,  have  been  given  as  a  part  of  this  classification 
for  the  purpose  of  clearly  indicating  the  application  of  the  ac- 
counting rules  in  specific  cases.  The  fists  in  every  case  are  to 
be  considered  as  merely  representative,  and  not  as  excluding 
from  any  account  analogous  items  which  happen  to  be  omitted 


206  APPENDIX  A 

from  the  list  appended.  On  the  other  hand,  the  appearance  of 
an  item  in  a  Hst  warrants  the  inclusion  of  the  item  in  the  account 
concerned  only  when  the  text  of  the  account  also  indicates  in- 
clusion, inasmuch  as  the  same  item  frequently  appears  in  more 
than  one  Ust.  The  item  of  boilers,  for  example,  will  be  found 
under  accounts  Nos.  18, 27,  37,  44,  and  45,  and  the  proper  charge 
in  any  one  instance  must  be  determined  by  the  text  of  the  ac- 
count. 

14.  Submission  of  Questions. — To  the  end  that  uniformity 
of  accounting  may  be  maintained  from  year  to  year,  carriers 
shall  submit  all  questions  of  doubtful  interpretation  of  the 
accounting  rules  to  the  Commission  for  consideration  and 
decision. 


TEXT    PERTAINING    TO    ACCOUNTS    FOR    IN- 
VESTMENT IN  ROAD  AND  EQUIPMENT 

I.  ROAD. 

The  several  primary  accounts  included  in  this  general  account 
are  designed  to  show  the  cost  of  land,  fixed  improvements,  and 
roadway  machines  and  tools  owned  by  the  carrier  and  devoted 
to  transportation  service. 

1.  ENGINEERING. 

This  account  shall  include  the  pay  and  expenses  of  engineers, 
assistants,  and  clerks  engaged  in  the  survey  and  construction 
of  new  lines  and  extensions,  or  in  making  additions  to  and  better- 
ments of  the  carrier's  road,  including  wharves  and  docks. 

LIST   OF   OFFICEE3   AND    EMPLOYEES 

(See  general  instructions,  section  13) 

Chief  engineer.  Transitmen. 

Assistant  engineers.  Levelmen. 

Bridge  engineer.  Rodmen. 

Signal  engineer.  Chainmen. 

Architects.  Axmen. 

Chief  clerk.  Messengers. 

Draftsmen.  Cooks  on  business  cars. 

Clerks,  Porters  on  business  cars. 


APPENDIX  A 


^07 


ITEMS   OP   EXPENSE    AND    SUPPLIES 

(See  general  instructions,  section  13) 


Atlases  and  maps. 
Axes. 

Barometers. 
Books  for  oflRce  use. 
Boxes   for   materials   and   instru- 
ments. 
Business  car  service. 
Cameras. 
Camp  equipage. 
Chains  for  surveyors. 
Compasses. 
Curves. 

Drawing  boards. 
Drawing  instruments. 
Field  glasses. 
Field  notebooks. 
Furniture  repairs  and  renewals. 
Hatchets. 

Heating  and  lighting. 
Levels. 
Magnets. 
Magnifiers. 
Marking  chalk. 
Official  train  service. 
Oilstones. 
Paper,  blue-print. 
Parallel  rules. 

Periodicals  and  newspapers- 
Photographic  supplies. 
Plane  tables. 
Planimeters. 


Plummets. 

Printing  and  stationery. 

Protractors. 

Provisions  for  business  cars. 

Ranging  poles. 

Reading  glasses. 

Rent  of  offices. 

Repairs  of  rented  offices. 

Rods  for  surveyors. 

Scales. 

Section  liners. 

Sextants. 

Slide  rules. 

Stakes. 

Straightedges. 

Tally  registers. 

Tape  lines. 

Tee-squares. 

Telegraph  service. 

Telephone  service. 

Telescopes. 

Thermometers. 

Thumb  tacks. 

Tracing  linen. 

Transits. 

Traveling  expenses. 

Traverse  tables. 

Triangles. 

Tripods. 

Verniers. 

Water  and  ice. 


Note  A. — When  employees  designated  above  are  engaged  in  the 
maintenance  of  the  road,  their  pay  and  expenses  while  thus  employed 
shall  be  charged  to  Operating  Expenses. 

Note  B. — Expenditures  for  tentative  or  preliminary  surveys  shall 
be  carried  in  a  suspense  account  until  it  is  determined  whether  or  not 
to  continue  the  work.  If  the  project  is  continued,  expenditures  for  all 
surveys  in  connection  therewith  shall  then  be  transferred  to  this  ac- 
count, and,  if  abandoned,  to  Operating  Expenses,  Income,  or  Profit  and 
Loss,  as  may  be  appropriate. 

Note  C. — The  cost  of  designing,  making  plans  and  specifications, 
and  supervising  the  construction  of  equipment  shall  be  included  in  the 
cost  of  the  equipment. 

Note  D. — The  cost  of  stationery  and  printing  supplies  used  for  ac- 
counting purposes  in  connection  with  engineering  work  shall  be  included 
in  account  No.  74,  "Stationery  and  printing,"  when  not  directly  as- 
signable to  specific  road  or  equipment  accounts. 

Note  E.  Fees  and  expenses  of  architects  specially  employed  for  de- 


208  APPENDIX  A 

signing  or  supervising  the  construction  of  buildings  shall  be  included  in 
the  accounts  appropriate  for  the  cost  of  the  buildings  constructed. 

2.  LAND  FOR  TRANSPORTATION  PURPOSES. 

This  account  shall  include  the  cost  of  land  of  necessary  width 
acquired  for  roadway;  the  cost  of  land  for  station,  office,  shop, 
and  other  grounds;  for  ingress  to  or  egress  from  such  grounds; 
for  borrow  pits,  waste  banks,  snow  fences,  sand  fences,  and 
other  railway  appurtenances;  and  for  storage  of  material  ad- 
joining the  right  of  way;  the  cost  of  land  for  wharves  and  docks 
and  the  cost  of  riparian  or  water  rights  necessary  therefor;  the 
cost  of  removing  from  the  right  of  way  and  locating  elsewhere 
the  property  of  others,  and  the  cost  of  the  necessary  land  for 
relocation  of  the  property,  when  such  costs  are  assumed  by  the 
accounting  carrier. 

The  carrier's  records  shall  be  kept  in  such  manner  as  to  show 
separately  the  cost  of  land  purchased  by  it  and  the  estimated 
values  at  time  of  acquisition  of  lands  donated. 

Proceeds  from  the  sale  of  timber  or  of  improvements  pur- 
chased with  right  of  way,  less  any  cost  of  removal,  shall  be 
credited  to  this  account. 

ITEMS   OP   EXPENSE 

(See  general  instructions,  section  13) 

Abstracts.  Plats, 

Appraisals.  Premiums  on  condemnation  bonds. 

Arbitrators  in  condemnation  cases.  Recording  deeds. 

Commissions  paid  to  others.  Payments    for    relinquishment    of 

Condemnation  expenses,  including  cattle  passes  and  other  rights, 
court  costs  and  special  counsel  Removal  and  relocation  of  build- 
fees,  ings   and    other   structures   not 

Damages  to  property  of  others.  purchased. 

Deferred  payments  for  right  of  Rent  of  land  when  part  of  con- 
way,  sideration  for  purchase. 

Ditches  for  waterways  when  part  Right-of-way    agents'    compensa- 

of  consideration.  tion  (engaged  solely  in  acquiring 

Judgments  and   decreed   costs  to  right  of  way). 

clear  or  defend  titles.  Taxes    accrued    and    assumed    at 

Notarial  fees.  time  of  purchase. 

Note. — The  cost  of  land  acquired  in  excess  of  that  necessary  for  trans- 
portation operations  shall  be  included  in  balance-sheet  account  No.  705, 
"  Miscellaneous  physical  property."  When  the  purchase  of  land  acquired 
for  transportation  operations  involves  the  purchase  of  land  not  used  for 


APPENDIX  A  209 

such  purposes  the  charges  to  this  account  shall  be  based  upon  the  esti- 
mated cost  of  only  that  portion  which  is  used  for  such  purposes,  and  the 
cost  of  the  remaining  land  shall  be  included  in  account  No.  705,  "Mis- 
cellaneous physical  property." 


3.  GRADING. 

This  account  shall  include  the  cost  of  clearing  and  grading 
the  roadway,  and  of  constructing  protection  of  a  permanent 
character  for  the  roadway,  tracks,  embankments,  and  cuts. 

When  a  part  of  a  bridge  or  trestle,  or  the  entire  structure,  is 
converted  by  filling  into  an  earth  embankment,  and  the  bridge 
is  used  in  lieu  of  a  temporary  trestle  for  the  purpose  of  filling, 
the  estimated  cost  of  such  temporary  trestle  shall  be  included  in 
the  cost  of  the  filUng,  and  charged  to  this  account.  (See  Note  A, 
under  account  No.  6,  ''Bridges,  trestles,  and  culverts.") 

When  a  tunnel  is  converted  into  an  open  cut,  the  cost  of 
clearing,  grubbing,  and  excavating  shall  be  included  in  this 
account. 

DETAILS    OF    ROADBED  AND  ITEMS    OF    EXPENSE 

(See  general  instructions,  section  13) 

Advertising  for  contractors'  bids.  Material  taken  from  borrow  pits. 

Berm  ditches.  Operation  of  steam  shovels. 

Blasting.  Payments  for  privilege  of  wasting 

Breakwaters.  material    on    the    property    of 

Bulkheading.  others. 

Clearing  land.  Payments  for  waste  banks  off  the 

Cribbing.  right  of  way. 

Ditches  (not  required  by  right-of-  Reconstruction  of  highways. 

way  agreement) .  Retaining  walls. 

Dressing  slopes.  Revetments. 

Excavation  for  conversion  of  tun-  Riprap. 

nels  into  open  cuts.  Spoil  banks. 

Filling  bridges,  trestles,  and  cul-  Temporary  trestling  for  fills. 

verts.  Tools  for  grading. 

Grading  outfits.  Wing  dams. 
Grubbling  land. 


4.  UNDERGROUND  POWER  TUBES. 

This  account  shall  include  the  cost  of  power  tubes  or  conduits 
for  underground  contacts  of  electric  railways  or  for  underground 
cables  of  cable  traction  railways. 


210  APPENDIX  A 


DETAILS  OF  UNDERGROUND  CONTACT  SYSTEM 

(See  general  instructions,  section  13) 
Concrete  work.  Pulleys. 

Drainpipes.  Sheaves. 

Manhole  covers.  Slot  rails. 

Manhole  frames.  Yokes. 

Plow  pits. 

Note. — The  cost  of  track  rails,  other  track  material,  and  electric 
contact  rails  and  insulators  shall  be  charged  to  the  accounts  appropriate 
for  such  property. 

5.  TUNNELS  AND  SUBWAYS. 

This  account  shall  include  the  cost  of  tunnels  and  subways 
for  the  passage  of  trains,  including  apparatus  for  ventilating 
and  hghting,  and  safety  devices  therein,  other  than  signals. 

Note  A. — The  cost  of  tracks,  including  guard  rails,  in  tunnels  shall 
not  be  charged  to  this  account. 

Note  B. — Station  subways  not  highway  crossings  are  includible  in 
account  No.  16,  "Station  and  office  buildings." 

Note  C. — If  a  tunnel  be  converted  into  an  open  cut,  the  accounting 
shall  be  in  accordance  with  general  instructions,  section  11. 

6.  BRIDGES,  TRESTLES,  AND  CULVERTS. 

This  account  shall  include  the  cost  of  the  substructure  and 
superstructure  of  bridges,  trestles,  and  culverts  which  carry 
the  tracks  of  the  carrier  over  watercourses,  ravines,  pubhc  and 
private  highways,  and  other  railways. 

DETAILS   OF   BRIDGE    STRUCTURES 

(See  general  instructions,  section  13) 

Abutments.  Guard  timbers. 

Bridge  signs.  Ice  breakers. 

Cofferdams.  Painting  (except  repainting). 

Concrete  and  masonry  ends   for       Pier  protection. 

culverts.  Piers  and  foundations. 

Cribs.  Pipe  culverts. 
Decking,  including  gravel  for  fire       Retaining  walls. 

protection.  Riprap  around  abutments. 

Dike  protection.  Riprap  at  culvert  ends. 

Drainage  systems.  Supports. 

Draw  protection.  Water  channels. 
Drawbridge     engines     and     ma-       Waterproofing. 

chinery.  Wing  dams. 

False  work.  Wing  walls. 

Note  A. — When  a  part  or  the  entire  structure  of  a  bridge  or  trestle 
is  converted,  by  filling,  into  an  earth  embankment,  the  ledger  value  of 


APPENDIX  A  211 

the  structure,  or  of  the  portion  thereof  filled,  shall  be  credited  to  this 
account.  In  case  the  bridge  or  trestle  is  used  in  lieu  of  a  temporary 
trestle  for  the  purpose  of  fiUing,  the  estimated  cost  of  such  temporary 
trestle  shall  be  charged  to  account  No.  3,  "Grading."  The  ledger  value 
of  the  structure,  or  portion  thereof,  filled,  less  the  value  of  the  salvage 
and  the  estimated  cost  of  trestle  charged  to  account  No.  3,  shall  be 
charged  to  Operating  Expenses. 

Note  B. — The  cost  of  bridges  to  carry  the  carrier's  tracks  over 
undergrade  crossings,  including  the  necessary  piers  and  abutments  for 
sustaining  them,  shall  be  included  in  this  account,  but  the  cost  of  under- 
grade roadways,  paving  on  right  of  way,  drainage  systems,  and  retaining 
walls  outside  of  the  bridge  abutments,  shall  be  included  in  account 
No.  15,  "Crossings  and  signs." 

7.  ELEVATED  STRUCTURES. 

This  account  shall  include  the  cost  of  elevated  structures  and 
foundations  of  elevated  railway  systems. 

This  account  is  applicable  to  structures  other  than  earthwork, 
which  are  for  the  purpose  of  elevating  tracks  above  the  grade  of 
streets,  and  which  are  not  properly  classable  as  bridges  or  trestles. 

Note. — The  cost  of  stations  and  other  structures  built  on  elevated 
structures  shall  be  accounted  for  according  to  the  class  of  the  structure 
thus  superimposed,  and  not  in  this  account. 

8.  TIES. 

This  account  shall  include  the  cost  of  cross,  switch,  bridge, 
and  other  track  ties  used  in  the  construction  of  tracks  for  the 
movement  or  storage  of  locomotives  and  cars  (including  tracks 
in  shops,  fuel  stations,  supply  yards,  etc.),  and  the  cost  of  addi- 
tional ties  subsequently  laid  in  such  tracks;  also  the  excess  cost 
of  metal  ties  used  in  repairs  of  track  over  the  cost  to  replace  in 
kind  wooden  ties  removed. 

The  cost  of  handling  ties  in  general  supply  and  storage  yards 
shall  be  included  as  store  expenses  apportioned  to  this  account 
when  the  ties  are  used  for  construction  purposes. 

Note  A. — The  cost  of  labor  for  unloading,  distributing,  and  placing 
the  ties  in  tracks,  and  the  cost  of  train  service  in  connection  with  the  dis- 
tribution of  ties  laid  shall  be  charged  to  account  No.  12,  "Track  laying 
and  surfacing." 

Note  B. — The  cost  of  ties  used  in  the  construction  of  car  floats  shall 
be  included  in  the  cost  of  such  floating  equipment,  and  the  cost  of  ties 
used  in  the  construction  of  temporary  tracks,  such  as  gravel-pit  and 
quarry  tracks,  shall  be  included  in  the  appropriate  clearing  accounts. 


212  APPENDIX  A 

9.  RAILS. 

This  account  shall  include  the  cost  of  rails  used  in  the  con- 
struction of  tracks  for  the  movement  or  storage  of  locomotives 
and  cars  (including  tracks  in  shops,  fuel  stations,  supply  yards, 
etc.),  and  the  excess  cost  of  heavier  rails  or  rails  of  improved 
types  or  quality  used  for  repairs  of  tracks  over  the  cost  to  re- 
place in  kind  the  rails  removed. 

The  cost  of  handhng  rails  in  general  supply  and  storage  yards 
shall  be  included  as  store  expenses  apportioned  to  this  account 
when  the  rails  are  used  for  construction  purposes. 

To  this  account  shall  be  credited  the  difference  between  the 
cost  (at  current  prices  at  time  of  removal)  of  heavy  rails  re- 
moved and  the  cost  of  Ughter  rails  applied  in  the  repairs  of  tracks. 

Note  A. — The  cost  of  labor  for  unloading,  distributing,  and  placing  the 
rails  in  tracks,  and  of  train  service  in  connection  with  the  distribution  of 
the  rails,  shall  be  charged  to  account  No.  12,  "Track  laying  and  sur- 
facing." 

Note  B. — When  secondhand  rails  are  first  applied  to  any  tracks  and 
no  more  than  the  actual  cost  of  such  rails  is  carried  in  the  road  accounts, 
the  excess  cost  of  new  or  heavier  rails  used  for  relaying  the  tracks  over 
the  cost  (at  prices  current  at  the  time  of  replacement)  of  rails  of  a  weight 
and  condition  equal  to  the  weight  and  condition  of  the  released  rails 
when  applied,  shall  be  charged  to  this  account. 

Note  C. — The  cost  of  rails  used  in  the  construction  of  car  floats  shall 
be  included  in  the  cost  of  such  floating  equipment,  and  the  cost  of  rails 
used  in  the  construction  of  temporary  tracks,  such  as  gravel-pit  and 
quarry  tracks,  shall  be  included  in  the  appropriate  clearing  accounts. 


10.  OTHER  TRACK  MATERIAL. 

This  account  shall  include  the  cost  of  material  used  in  the 
construction  of  tracks  for  the  movement  or  storage  of  locomo- 
tives and  cars  (including  tracks  in  shops,  fuel  stations,  supply 
yards,  etc.),  except  ballast  and  material  chargeable  to  foregoing 
accounts;  also  the  excess  cost  of  heavier  or  improved  "other 
track  material"  used  in  repairs  of  tracks  over  the  cost  of  re- 
placing in  kind  such  material  removed. 

The  cost  of  handling  "other  track  material"  in  general  supply 
and  storage  yards  shall  be  included  as  store  expenses  appor- 
tioned to  this  account  when  such  material  is  used  in  the  con- 
struction of  new  tracks. 


APPENDIX  A 


^13 


ITEMS    OF   OTHER  TRACK   MATERIAL 

(See  general  instructions,  section  13) 


Angle  bars. 

Anticreepers. 

Bumping  posts. 

Compromise  joints. 

Connecting  rods. 

Crossings  for  steam  ..and  elec- 
tric railways,  including  founda- 
tions or  bases. 

Derails. 

Frog  blocking. 

Frogs. 

Guard-rail  blocking. 

Guard-rail  clamps. 

Guard-rail  fasteners. 

Guard    rails,    switch    and    other. 

Main  rods. 

Nut  locks. 

Nuts. 

Offset  bars. 

Rail  braces. 

Rail  chairs. 


Rail  clips. 

Rail  joints. 

Rail  rests. 

Rail  shims. 

Rail  splices. 

Splice  bars. 

Step  chairs. 

Switch  chairs. 

Switch  crossings. 

Switch  lamps. 

Switch  locks  and  keys. 

Switch  points. 

Switch  stands. 

Switch  targets. 

Switches. 

Tie  plates. 

Tie  plugs. 

Tie-rods. 

Track  bolts. 

Track  insulators. 

Track  spikes. 


Note  A. — The  cost  of  labor  and  train  service  for  distributing,  unload- 
ing, and  applying  "other  track  material"  shall  be  charged  to  account 
No.  12,  "Track  laying  and  surfacing." 

Note  B. — No  entry  is  required  in  this  account  with  respect  to  im- 
proved "other  track  material"  unless  installed  under  a  definite  plan  of 
changing  standards,  such  as  increasing  the  weight  of  rail. 

Note  C. — The  cost  of  "other  track  material"  used  in  the  construc- 
tion of  car  floats  shall  be  included  in  the  cost  of  such  floating  equipment, 
and  the  cost  of  such  track  material  used  in  the  construction  of  temporary 
tracks,  such  as  gravel-pit  and  quarry  tracks,  shall  be  included  in  the 
appropriate  clearing  accounts. 


11.  BALLAST. 

This  account  shall  include  the  cost  of  gravel,  stone,  slag, 
cinders,  sand,  and  like  material  used  in  ballasting  tracks  (includ- 
ing tracks  in  shops,  fuel  stations,  supply  yards,  etc.)  not  pre- 
viously ballasted,  including  cost  of  work-train  service  and  of 
unloading;  cost  of  ballast  applied  in  excess  of  ballast  required 
to  restore  to  its  maximum  height  and  width  the  ballast  pre- 
viously put  on  the  roadbed;  and  the  excess  cost  of  improved 
ballast  used  in  renewals  over  the  cost  to  replace  in  kind  to  the 
original  height  and  width  the  ballast  removed.  (Special  instruc- 
tions, section  11,  for  operating  expense  accounts,  apply  to  the 


214  APPENDIX  A 

accounting  for  pits  from  which  ballast  material  is  obtained 
either  for  construction  work  or  for  maintenance,  or  for  both.) 

Note  A. — The  cost  of  ballast  used  in  the  construction  of  temporary 
tracks,  such  as  gravel-pit  and  quarry  tracks,  shall  be  included  in  the 
appropriate  clearing  accounts. 

Note  B. — Earth  placed  to  form  a  crown  in  the  middle  of  the  track 
is  not  to  be  considered  as  ballast. 

Note  C. — The  cost  of  ballast  material  placed  on  the  decking  of 
bridges  solely  for  fire-protection  purpose  shall  be  included  in  account 
No.  6,  "Bridges,  trestles,  and  culverts." 

Note  D. — No  charge  shall  be  made  to  the  accounts  of  this  classifica- 
tion representing  the  value  of  cinders  accumulated  by  the  carrier. 

12.  TRACK  LAYING  AND  SURFACING. 

This  account  shall  include  the  cost  of  distributing  (including 
train  service) ,  laying,  and  adjusting  ties,  rails,  and  other  track  ma- 
terial used  in  the  construction  of  tracks  for  the  movement  or  stor- 
age of  locomotives  or  cars,  including  repair  tracks,  but  not  tracks 
on  car  floats  or  temporary  tracks  the  cost  of  which  is  chargeable 
to  clearing  accounts.  It  shall  also  include  the  cost  of  the  labor 
expended  in  placing  ballast  in  tracks  not  previously  ballasted. 

Note  A. — The  cost  of  distributing  and  adjusting  ties,  rails,  ballast, 
and  other  track  material  for  repairs  shall  be  charged  to  Operating  Ex- 
penses, both  when  such  materials  are  replaced  in  kind  and  when  re- 
placed with  improved  and  heavier  material. 

Note  B. — The  cost  of  work-train  service  in  delivering  ballast  and  of 
unloading  such  material  is  provided  for  in  account  No.  11,  "Ballast." 

13.  RIGHT-OF-WAY  FENCES. 

This  account  shall  include  the  cost  of  right-of-way  fences  (in- 
cluding permanent  snow  and  sand  fences  erected  in  lieu  of  right- 
of-way  fences),  farm  gates,  cattle  guards,  wing  fences,  aprons, 
and  hedges,  on  property  not  previously  fenced,  excluding  those 
around  stockyards,  fuel  stations,  station  and  shop  grounds,  and 
building  sites. 

14.  SNOW  AND  SAND  FENCES  AND  SNOWSHEDS. 
This  account  shall  include  the  cost  of  snowsheds,  including 

rock  filling  when  necessary,  and  cost  of  permanent  or  portable 
fences  for  the  protection  of  tracks  from  snow  and  sand,  other 
than  such  permanent  fences  erected  in  lieu  of  right-of-way  fences 
and  chargeable  to  account  No.  13,  ''Right-of-way  fences." 


APPENDIX  A  215 

15.  CROSSINGS  AND  SIGNS. 

This  account  shall  include  the  cost  of  constructing  farm 
passes,  highways,  and  other  railways  across  the  carrier's  right 
of  way,  except  railways  crossing  at  grade;  cost  of  track  signs, 
crossing  gates,  highway-crossing  alarms,  planking,  paving,  and 
watch  houses  at  crossings;  and  the  portion  borne  by  the  carrier 
of  cost  of  overgrade-  and  undergrade  crossings  constructed  to 
eUminate  grade  crossings. 

DETAILS   OF  GRADE    CROSSINGS 

(See  general  inatructiong,  section  13) 
Batteries,  with  track  instruments      Planking. 

and  connections.  Soil  crossing  drains. 

Crossing  gates.  Warning  signals. 

Crossing  signal  bells.  Watch  houses. 

Paving.  Water  pipes. 

DETAILS   OF   OVERGRADE    CROSSINGS 

(See  general  instructions,  section  13) 
Bridge  superstructures.  Piers,  including  foundations. 

Bridge  substructures.  Retaining  and  wing  walls,  includ- 

Decking,  including  roadways.  ing  foundations. 

Drainage  systems. 

DETAILS   OF   UNDERGRADE    CROSSINGS 

(See  general  instructions,  section  13) 

Curbing.  Retaining  walls  outside  of  bridge 

Drainage  systems.  abutments. 

Paving  on  right  of  way.  Roadways. 

Sidewalks. 

LIST    OF   SIGNS 

(See  general  instructions,  section  13) 

Boundary  signs.  Subdivision  boards. 

Mile  signs.  Tunnel  caution  signs. 

Monument  stones.  Water  station  signs. 

Overhead-bridge     caution  signs.       Water  trough  signs. 
Section  signs.  Whistle  signs. 

Slow  or  stop  signs.  Yard-limit  signs. 

Note  A. — The  cost  of  shop  and  station  overgrade  footbridges  and 
subways  not  public  highways  shall  be  included  in  the  cost  of  the  build- 
ings. 

Note  B. — The  cost  of  bridges  or  trestles  carrying  the  carrier's  tracks 
over  roads,  highways,  or  other  railways  shall  be  charged  to  account 
No.  6,  "Bridges,  trestles,  and  culverts,"  but  the  cost  of  a  bridge  or  other 
structure  which  carries  farm  passes,  highways,  or  the  tracks  of  another 
carrier  over  the  carrier's  tracks  shall  be  included  in  this  account. 


£16 


APPENDIX  A 


16.  STATION  AND  OFFICE  BUILDINGS. 

This  account  shall  include  the  cost  of  station  and  office  struc- 
tures, their  fixtures,  appurtenances,  and  furniture  necessary  first 
to  equip  the  buildings  for  use. 


STATION   AND    OFFICE    8TBUCTUBES  AND   DETAILS 

(See  general  instructions,  section  13) 


Baggage  rooms. 

Breakwaters  for  protection  of 
buildings. 

Buildings  and  rooms  for  train- 
men. 

Buildings  on  piers. 

Call  bells. 

Coal  bins. 

Coal  transferring  machinery  (not 
on     coal     and     ore     wharves). 

Coal  trestles  (not  at  fuel  stations). 

Commissarial  buildings. 

Drainage   and   sewerage   systems. 

Dwellings. 

Eating  houses. 

Electric  wiring. 

Elevators  and  machinery. 

Express  buildings. 

Fences. 

Fire-engine  houses. 

Freight  cranes. 

Freight  derricks. 

Freight  handling  machinery. 

Freight  houses. 

Garages. 

Gas-supply  systems. 

General  office  buildings. 

Grain  cribs. 

Grain  elevators. 

Grain  warehouses. 

Greenhouses. 

Hay  houses. 

Heating  plants. 

Hedges. 

Hoisting  engines,  for  handling 
freight. 

Hose  houses. 

Ice  houses. 

Lighting  plants. 

Mail  cranes. 


Milk  stands. 

Office  buildings. 

Ore-transferring  machinery. 

Outhouses. 

Pavement  within  ground  limits. 

Platforms,  freight. 

Platforms,  passenger,  including 
planking  between  tracks. 

Power  distribution  systems,  in- 
terior. 

Reading  rooms. 

Rooms  for  Y.  M.  C.  A. 

Scale  houses. 

Sidewalks. 

Stables. 

Station  footbridges  (not  highway 
crossings). 

Station  intertrack  fences. 

Station  platforms. 

Station  signs. 

Station  stairways. 

Station  subways  (not  highway 
crossings). 

Station  power  houses. 

Stations,  freight. 

Stations,  passenger. 

Stock  pens. 

Storehouses. 

Telegraph  offices. 

Telpher  systems. 

Track  scales. 

Transfer  houses. 

Transfer  platforms. 

Waiting  rooms. 

Warehouses. 

Washrooms. 

Water-supply  systems. 

Yard  offices. 


Note  A. — Office  buildings  used  exclusively  in  connection  with  main- 
tenance of  way  shall  be  included  in  account  No.  17,  "Roadway  build- 


APPENDIX  A  217 

ings."    Those  used  exclusively  in  connection  with  maintenance  of  equip- 
ment shall  be  included  in  account  No.  20,  "Shops  and  enginehouses." 

Note  B. — The  cost  of  grading  and  preparing  grounds,  both  before 
and  after  the  construction  of  station  and  office  buildings,  and  the  cost  of 
constructing  sidewalks,  driveways,  and  fences  thereon,  shall  be  included 
in  the  cost  of  the  buildings,  as  shall  also  the  fees  and  expenses  of  archi- 
tects specially  employed  for  designing  or  supervising  the  construction 
of  the  buildings,  but  the  cost  of  restoring  the  grounds  after  addition  and 
betterment  work  shall  be  included  in  the  appropriate  operating  expense 
accounts.  The  cost  of  permanent  water  rights  shall  also  be  included  in 
the  cost  of  the  buildings. 

17.  ROADWAY  BUILDINGS. 

This  account  shall  include  the  cost  of  roadway  shops  and  other 
roadway  buildings,  including  drainage,  water,  gas,  and  sewer 
pipes  and  connections;  and  all  machinery,  fixtures,  and  furniture 
to  equip  the  buildings  ready  for  use. 

LIST   OF    ROADWAY    BUILDIN08 

(See  general  instructions,  section  13) 

Bins  for  material.  Offices. 

Blacksmith  shops.  Outhouses. 

Boarding  houses.  Planing  mills. 
Breakwaters     for     protection     of       Rail    shops    for    repair    of    track 

buildings.  material. 

Carpenter  shops.  Repair  shops. 

Dwellings.  Scrap  bins. 

Fire-engine  houses.  Section  dwelling  houses. 

Frog   shops   for   repair  of    track       Stables. 

material.  Storehouses. 

Hand-car  houses.  Tool  houses. 

Lighting  plants.  Watch  houses. 
Lumber  sheds. 

Note. — The  cost  of  grading  and  preparing  grounds  both  before  and 
after  the  construction  of  roadway  buildings,  and  the  cost  of  constructing 
sidewalks,  driveways,  and  fences  thereon  shall  be  included  in  the  cost  of 
the  buildings,  as  shall  also  the  fees  and  expenses  of  architects  specially 
employed  for  designing  or  supervising  the  construction  of  the  buildings, 
but  the  cost  of  restoring  the  grounds  after  addition  and  betterment 
work  shall  be  included  in  the  appropriate  operating  expense  accounts. 
The  cost  of  permanent  water  rights  shall  also  be  included  in  the  cost  of 
the  buildings. 

18.  WATER  STATIONS. 

This  account  shall  include  the  cost  of  structures,  facilities,  and 
appliances  necessary  to  equip  for  service  stations  for  supplying 
water.  The  cost  of  analyses  of  water  preliminary  to  the  estab- 
lishment of  water  stations  shall  be  included  in  this  account. 


218  APPENDIX  A 


WATEE   STATION   STRUCTURES   AND   DETAILS 

(See  general  instructions,  section  13) 

Boilers.  Settling  basins. 

Breakwaters  for     protection     of       Stationary  engines. 

buildings.  Steam  pipes. 

Buildings  on  piers.  Tanks  and  foundations. 

Cisterns.  Test  wells. 

Dams.  Track  tanks. 

Fences.  Tubs. 

Outhouses.  Water  cranes. 

Penstocks.  Water  pipe  lines. 

Pump  houses.  Water-treating  plants. 

Pumps,  Wells. 

Purifying  plants.  Windmills. 
Reservoirs. 

Note  A. — The  cost  of  water  stations  used  solely  for  suppljnng  water 
to  shops,  power  plants,  stations,  hotels,  tenement  houses,  or  section 
houses  shall  be  charged  to  the  appropriate  accounts  relating  to  the 
property  so  supplied. 

Note  B. — The  cost  of  a  temporary  water  station  established  only  for 
use  during  the  construction  period  shall  be  included  in  the  primary  ac- 
counts to  which  is  charged  the  cost  of  the  work  in  connection  with  which 
the  water  station  is  used. 

Note  C. — The  cost  of  grading  and  preparing  grounds  both  before 
and  after  the  construction  of  water  station  buildings,  and  the  cost  of 
constructing  sidewalks,  driveways,  and  fences  thereon  shall  be  included 
in  the  cost  of  the  buildings,  as  shall  also  the  fees  and  expenses  of  archi- 
tects specially  employed  for  designing  or  supervising  the  construction 
of  the  buildings,  but  the  cost  of  restoring  the  grounds  after  addition  and 
betterment  work  shall  be  included  in  the  appropriate  operating  expense 
accounts.  The  cost  of  permanent  water  rights  shall  also  be  included  in 
the  cost  of  the  buildings. 

19.  FUEL  STATIONS. 

This  account  shall  include  the  cost  of  structures,  facilities 
other  than  tracks,  and  appliances  necessary  to  equip  for  service 
stations  for  supplying  fuel  to  locomotives  and  floating  equip- 
ment. 

FUEL   STATION   STRUCTURES   AND   DETAILS 

(See  general  instructions,  section  13) 

Breakwaters  for     protection     of       Coal  pockets  and  chutes. 

buildings.  Dumping  machinery. 

Buckets.  Elevating  machinery. 

Buildings  on  piers.  Fences. 

Coal  buckets.  Fuel  houses  or  stations. 

Coal  buggies.  Fuel-oil  columns. 

Coal  hoists.  Fuel-oil  plants. 


APPENDIX  A  219 

Fuel-oil  pumps.  Scales. 

Fuel-oil  sumps.  Sheds. 

Fuel-oil  tanks.  Stationary  engines. 

Fuel  platforms.  Tipple  cars. 

Fuel  wharves.  Weighing  apparatus. 

Inclines.  Wood  racks. 

Outhouses. 

Note  A. — The  cost  of  fuel  stations,  coal  houses,  etc.,  used  solely 
for  supplying  fuel  to  shops,  power  plants,  stations,  hotels,  tenement 
houses,  or  section  houses  shall  be  charged  to  the  appropriate  accounts 
relating  to  the  property  so  supplied. 

Note  B. — The  cost  of  a  temporary  fuel  station  established  only  for 
use  during  the  construction  period  shall  be  included  in  the  primary  ac- 
counts to  which  is  charged  the  cost  of  the  work  in  connection  with  which 
the  fuel  station  is  used. 

Note  C. — The  cost  of  grading  and  preparing  grounds  both  before  and 
after  the  construction  of  fuel  station  buildings,  and  the  cost  of  construct- 
ing sidewalks,  driveways,  and  fences  thereon,  shall  be  included  in  the 
cost  of  the  buildings,  as  shall  also  the  fees  and  expenses  of  architects 
specially  employed  for  designing  or  supervising  the  construction  of  the 
buildings,  but  the  cost  of  restoring  the  grounds  after  addition  and  better- 
ment work  shall  be  included  in  the  appropriate  operating  expense  ac- 
counts. The  cost  of  permanent  water  rights  shall  also  be  included  in  the 
cost  of  the  buildings. 

20.  SHOPS  AND  ENGINEHOUSES. 

This  account  shall  include  the  cost  of  buildings  to  be  used  as 
shops,  enginehouses,  and  storehouses  for  material  for  mainte- 
nance of  equipment;  foundations,  except  those  special  to  par- 
ticular machines  and  other  apparatus;  furniture  and  fixtures 
other  than  equipment  chargeable  to  account  No.  44,  "Shop 
machinery";  drainage,  sewerage,  and  water-supply  systems; 
and  plants  for  heat  and  Ught, 

SHOP   AND    ENQINEH0U8E    STRUCTURES   AND   DETAILS 

(See  general  instructions,  section  13) 

Air-compressor  houses.  Cinder  pits. 

Ash  pits  and  pockets.  Cinder  pockets. 

Ash  plants.  Drop  pits. 

Bins  for  material.  Dry  houses. 

Blacksmith  shops.  Electric-power    distribution     sys- 

Breakwaters     for     protection     of  tems  within  buildings. 

buildings.  Enginehouses. 

Buildings  on  piers.  Fire-engine  houses. 

Car  sheds.  Footbridges     (not     public     high- 
Car  shops.  ways). 

Carpenter  shops.  Foundries. 


220  APPENDIX  A 

Gas-compressor  houses.  Sand  houses. 

Heating  plants.  Scale  houses. 

Hose  houses.  Scrap  bins. 

Ice  houses.  Sidewalks. 

Laboratories.  Stables. 

Lighting  plants.  Steam-distribution  systems,   inte- 

Lumber  sheds.  nor. 

Machine  shops.  Storehouses. 

Material  and  supply  truck  tracks.       Tanks,  gas. 

Motor-crane  tracks.  Tanks,  oil. 

Offices,  shop.  Test  rooms. 

Oil  houses.  Tin  shops. 

Outhouses.  Tool  houses. 

Paint  shops.  Track  scales. 

Pipe  lines,  air,  interior.  Transfer  tables. 

Pipe  lines,  car-heating.  Turntables. 

Pipe  lines,  gas,  interior.  Upholstering  shops. 

Planing  mills.  Warehouses. 

Platforms,  shop  and  yard.  Wash  rooms. 

Repair  shops.  Watch  houses. 

Note  A. — The  cost  of  distinct  power  plant  buildings  for  shop  purposes 
shall  be  included  in  account  No.  29,  "Power  plant  buildings."  Cost  of 
distribution  systems  leading  from  such  power  plants  to  shops  and  engine- 
houses  shall  be  included  in  account  No.  32,  "Power  distribution  sys- 
tems." 

Note  B. — The  cost  of  grading  and  preparing  grounds  both  before 
and  after  the  construction  of  shop  and  enginehouse  buildings,  and  the 
cost  of  constructing  sidewalks,  driveways,  and  fences  thereon,  shall  be 
included  in  the  cost  of  the  buildings,  as  shall  also  the  fees  and  expenses 
of  architects  specially  employed  for  designing  or  supervising  the  con- 
struction of  the  buildings,  but  the  cost  of  restoring  the  grounds  after 
addition  and  betterment  work  shall  be  included  in  the  appropriate  operat- 
ing expense  accounts.  The  cost  of  permanent  water  rights  shall  also 
be  included  in  the  cost  of  the  buildings. 

Note  C. — The  cost  of  shop  buildings,  devoted  solely  to  the  main- 
tenance of  way  and  structures  shall  be  included  in  account  No.  17, 
"Roadway  buildings." 

21.  GRAIN  ELEVATORS. 

This  account  shall  include  the  cost  of  structures  for  the  trans- 
fer, treatment,  and  storage  of  grain,  including  cost  of  conveyors, 
machinery,  and  fixtures. 

The  buildings  referred  to  in  this  account  are  not  small  storage 
elevators  at  stations  where  grain  is  received  for  shipment,  etc., 
but  large  elevators  in  which  grain  is  stored  for  various  owners. 

Note  A. — Small  storage  elevators  at  way  stations  are  classed  as 
station  buildings. 

Note  B. — The  cost  of  grading  and  preparing  grounds  both  before 


APPENDIX  A  221 

and  after  the  construction  of  grain-elevator  buildings,  and  the  cost  of 
constructing  sidewalks,  driveways,  and  fences  thereon,  shall  be  included 
in  the  cost  of  the  buildings,  as  shall  also  the  fees  and  expenses  of  archi- 
tects specially  employed  for  designing  or  supervising  the  construction 
of  the  buildings,  but  the  cost  of  restoring  the  grounds  after  addition 
and  betterment  work  shall  be  included  in  the  appropriate  operating  ex- 
pense accounts.  The  cost  of  permanent  water  rights  shall  also  be  in- 
cluded in  the  cost  of  the  buildings. 

22.  STORAGE  WAREHOUSES. 

This  account  shall  include  the  cost  of  storage  warehouses,  in- 
cluding machinery  and  fixtures  therein. 

The  buildings  herein  referred  to  are  not  the  ordinary  freight 

warehouses  or  stations  where  freight  is  received  for  shipment, 

etc.,  but  warehouses  in  which  merchandise  is  stored  and  which 

the  railway  companies  or  others  operate  commercially  as  storage 

warehouses. 

Note. — The  cost  of  grading  and  preparing  grounds  both  before  and 
after  the  construction  of  storage  warehouse  buildings,  and  the  cost  of 
constructing  sidewalks,  driveways,  and  fences  thereon,  shall  be  included 
in  the  cost  of  the  buildings,  as  shall  also  the  fees  and  expenses  of  archi- 
tects specially  employed  for  designing  or  supervising  the  construction 
of  the  buildings,  but  the  cost  of  restoring  the  grounds  after  addition  and 
betterment  work  shall  be  included  in  the  appropriate  operating  expense 
accounts.  The  cost  of  permanent  water  rights  shall  also  be  included  in 
the  cost  of  the  buildings. 

23.  WHARVES  AND  DOCKS. 

This  account  shall  include  the  cost  of  wharves,  docks,  dry 
docks,  sUps,  float  bridges,  and  other  landings  for  vessels,  includ- 
ing the  cost  of  necessary  dredging,  and  the  cost  of  float-bridge 
machinery;  also  the  cost  of  piling,  pile  protection,  cribs,  coffer- 
dams, walls,  and  other  necessary  devices  and  apparatus  for  the 
operation  or  protection  of  wharves  and  docks. 

DETAILS   OF   WHARVES   AND    DOCKS 

(See  general  instructions,  section  13) 

Bridge  pontoons.  Ferry  racks. 

Bulkheads.  Ferry  slips. 

Caissons.  Jetties. 

Cribwork.  Jetty  inclines. 

Dry  docks.  Transfer-bridge  machinery. 

Ferry-bridge  machinery.  Transfer  bridges. 
Ferry  bridges. 

Note  A. — The  cost  of  coal  and  ore  wharves  and  docks  shall  be  in- 
cluded in  account  No.  24,  "Coal  and  ore  wharves." 


222  APPENDIX  A 

Note  B. — The  cost  of  the  land  on  which  wharves  are  built  and  cost 
of  riparian  or  water  rights  for  wharves  and  docks  shall  be  charged  to 
account  No.  2,  "Land  for  transportation  purposes." 

Note  C. — The  cost  of  buildings  located  on  wharves  shall  be  included 
in  the  accounts  appropriate  for  the  class  of  building. 

Note  D. — The  cost  of  grading  and  preparing  grounds  both  before  and 
after  the  construction  of  wharves  (other  than  coal  and  ore  wharves)  and 
the  cost  of  constructing  sidewalks,  driveways,  and  fences  thereon,  shall 
be  included  in  the  cost  of  the  wharves,  but  the  cost  of  restoring  the 
grounds  after  addition  and  betterment  work  shall  be  included  in  the 
appropriate  operating  expense  accounts.  The  cost  of  permanent  water 
rights  shall  also  be  included  in  the  cost  of  the  wharves. 

24.  COAL  AND  ORE  WHARVES. 

This  account  shall  include  the  cost  of  wharves  and  docks  for 
the  transfer,  treatment,  blending,  or  storage  of  coal  or  ore,  in- 
cluding the  cost  of  necessary  dredging  and  of  conveyors,  ma- 
chinery, and  fixtures. 

Note  A, — The  structures  referred  to  in  this  account  do  not  include 
small  transfer  or  storage  trestles  or  wharves  at  stations  where  coal  is 
stored  or  deUvered,  such  trestles  being  classed  as  station  buildings. 

Note  B. — The  cost  of  grading  and  preparing  grounds  both  before 
and  after  the  construction  of  coal  and  ore  wharves,  and  the  cost  of  con- 
structing sidewalks,  driveways,  and  fences  thereon,  shall  be  included  in 
the  cost  of  the  wharves,  as  shall  also  the  fees  and  expenses  of  architects 
specially  employed  for  designing  or  supervising  the  construction  of  the 
wharves,  but  the  cost  of  restoring  the  grounds  after  addition  and  better- 
ment work  shall  be  included  in  the  appropriate  operating  expense  ac- 
counts. The  cost  of  permanent  water  rights  shall  also  be  included  in  the 
cost  of  the  wharves. 

25.  GAS  PRODUCING  PLANTS. 

This  account  shall  include  the  cost  of  gas  producing  and  gas 
compressing  plants,  and  the  cost  of  machinery  and  other  ap- 
paratus in  such  plants. 

Note. — The  cost  of  grading  and  preparing  grounds  both  before  and 
after  the  construction  of  gas  plant  buildings,  and  the  cost  of  construct- 
ing sidewalks,  driveways,  and  fences  thereon,  shall  be  included  in  the 
cost  of  the  buildings,  as  shall  also  the  fees  and  expenses  of  architects 
specially  employed  for  designing  or  supervising  the  construction  of  the 
buildings,  but  the  cost  of  restoring  the  grounds  after  addition  and  better- 
ment work  shall  be  included  in  the  appropriate  operating  expense  ac- 
counts. The  cost  of  permanent  water  rights  shall  also  be  included  in 
the  cost  of  the  buildings. 

26.  TELEGRAPH  AND  TELEPHONE  LINES. 

This  account  shall  include  the  cost  of  telegraph  and  telephone 
lines,  including  terminal  equipment. 


APPENDIX  A 


223 


DBTAILS  OF  TBLBQBAPH  AND  TELEPHONE  TERMINAL  EQUIPMENT 

(See  general  instructions,  section  13) 


Batteries. 

Cables  and  wires,  interior. 
Conduits,  interior. 
Connecting  wires. 
Current-controlling  instruments. 
Electric  generators  and  motors. 
Electric  meters. 
Engines,  stationary. 


Fuses  and  mechanical  protectors. 

Rectifiers. 

Rheostats. 

Sending  and  receiving  instruments. 

Switchboards. 

Testing  outfits. 

Transformers. 


DETAILS   OF   TELEGRAPH   AND   TELEPHONE    OUTSIDE    PLANT 

(See  general  instructions,  scetion  13) 


Aerial  attachments. 

Braces. 

Brackets. 

Cable  boxes  and  appurtenances. 

Cables  and  wires,  aerial. 

Conduits  and  appurtenances. 

Cross  arms. 

Guy  stubs. 


Guy  wires. 
Insulators. 
Poles. 

Submarine  cables  and  connections. 
Telephone  pole  boxes. 
Towers. 

Underground  cables  and  connec- 
tions. 


27.  SIGNALS  AND  INTERLOCKERS. 

This  account  shall  include  the  cost  of  interlocking  and  other 
signal  apparatus  for  governing  the  movement  of  trains,  includ- 
ing towers  and  other  buildings  in  connection  therewith. 

DETAILS   or   SIGNALS   AND    INTERLOCKBBS 

(See  general  instructions,  section  13) 


Air  compressors. 

Batteries. 

Boilers. 

Distant  signals. 

Dynamos. 

Engines,  stationary. 

Gates  at  crossings  of  other 

ways. 
Home  signals. 
Interlocker  buildings. 
Interlocker  machinery. 
Interlocker  mechanism. 
Levers. 
Rail  bonds. 

Railway-crossing  signals. 
Relays. 


Semaphores. 

Signal  and  switch  levers. 
Signal  arms. 
Signal  blades. 
Signal  bridges. 
Signal  buildings, 
rail-       Signal  lamp  brackets  and  connec- 
tions. 
Signal  lamps. 
Signal  machinery. 
Signal  poles  and  foundations. 
Signal  pulleys  and  foundations. 
Special  appliances. 
Station  signals. 
Train-order  signals. 
Wiring. 


Note  A. — When  signal  or  interlocking  apparatus  is  located  in  a  sta- 
tion building,  the  entire  cost  of  the  building  shall  be  included  in  account 
No.  16,  "Station  and  office  buildings." 


224  APPENDIX  A 

Note  B. — The  cost  of  grading  and  preparing  grounds  both  before  and 
after  the  construction  of  signal  and  interlocker  buildings,  and  the  cost 
of  constructing  sidewalks,  driveways,  and  fences  thereon,  shall  be  in- 
cluded in  the  cost  of  the  buildings,  as  shall  also  the  fees  and  expenses  of 
architects  specially  employed  for  designing  or  supervising  the  construc- 
tion of  the  buildings,  but  the  cost  of  restoring  the  grounds  after  addition 
and  betterment  work  shall  be  included  in  the  appropriate  operating  ex- 
pense accounts.  The  cost  of  permanent  water  rights  shall  also  be  in- 
cluded in  the  cost  of  the  buildings. 

28.  POWER  DAMS,  CANALS,  AND  PIPE  LINES. 

This  account  shall  include  the  cost  of  all  dams,  canals,  pipe 
lines,  and  accessories  devoted  to  the  utilization  of  water  power 
for  the  operation  of  trains  and  cars,  and  to  furnish  power,  heat, 
and  light  for  general  purposes. 

DETAILS   OP   DAMS,    CANALS,    AND    PIPE    LINES 

(See  general  instructions,  section  13) 

Aqueducts.  Penstocks. 

Bridges.  Reservoirs. 

Fences.  Roadways. 

Footbridges.  Sluices. 

Forebays.  Valves. 

Gates.  Viaducts. 

Grids.  Walls. 

Inlet  valves.  Water  rights. 

29.  POWER  PLANT  BUILDINGS. 

This  account  shall  include  the  cost  of  the  buildings  of  power 
plants  erected  to  furnish  power  for  the  operation  of  trains  and 
cars,  and  to  furnish  power,  heat,  and  Hght  for  stations,  shops, 
or  general  purposes;  foundations,  except  those  special  to  par- 
ticular machines  and  other  apparatus;  drainage,  water,  and 
sewer  pipes  and  their  connections;  fixtures,  including  wiring  for 
lighting  and  heating;  and  miscellaneous  furniture  and  fixtures. 

Note  A. — The  cost  of  power  plant  machinery  and  other  apparatus 
shall  be  included  in  account  No.  45,  "Power  plant  machinery." 

Note  B. — The  cost  of  grading  and  preparing  grounds,  both  before 
and  after  the  construction  of  power  plant  buildings,  and  the  cost  of  con- 
structing sidewalks,  driveways,  and  fences  thereon  shall  be  included  in 
the  cost  of  the  buildings,  as  shall  also  the  fees  and  expenses  of  architects 
specially  employed  for  designing  or  supervising  the  construction  of  the 
buildings,  but  the  cost  of  restoring  the  grounds  after  addition  and  better- 
ment work  shall  be  included  in  the  appropriate  operating  expense  ac- 
counts. The  cost  of  permanent  water  rights  shall  also  be  included  in  the 
cost  of  the  buildings. 


APPENDIX  A  225 

30.  POWER  SUBSTATION  BUILDINGS. 

This  account  shall  include  the  cost  of  the  buildings  of  power 
substations  (including  storage-battery  stations)  erected  to 
transform  power  for  the  operation  of  trains  and  cars,  and  for 
heat,  hght,  and  general  purposes;  foundations,  except  those 
special  to  particular  machines  and  other  apparatus;  drainage, 
water,  and  sewer  pipes  and  their  connections;  fixtures,  includ- 
ing wiring,  for  Hghting  and  heating;  and  miscellaneous  furniture 
and  fixtures. 

Note  A. — The  cost  of  substation  machinery  and  other  apparatus  for 
transforming  or  storing  power  in  power  substations  shall  be  included  in 
account  No.  46,  "Power  substation  apparatus." 

Note  B. — The  cost  of  grading  and  preparing  grounds,  both  before 
and  after  the  construction  of  power  substation  buildings,  and  the  cost 
of  constructing  sidewalks,  driveways,  and  fences  thereon,  shall  be  in- 
cluded in  the  cost  of  the  buildings,  as  shall  also  the  fees  and  expenses  of 
architects  specially  employed  for  designing  or  supervising  the  construc- 
tion of  the  buildings,  but  the  cost  of  restoring  the  grounds  after  addition 
and  betterment  work  shall  be  included  in  the  appropriate  operating  ex- 
pense accounts.  The  cost  of  permanent  water  rights  shall  also  be  in- 
cluded in  the  cost  of  the  buildings. 

31.  POWER  TRANSMISSION  SYSTEMS. 

This  account  shall  include  the  cost  of  high-tension  transmis- 
sion systems,  whether  overhead,  surface  or  underground,  used 
for  transferring  power  from  producing  plants  to  a  place  where 
it  is  transformed  for  propelling  trains  and  cars,  or  for  power, 
heat,  hght,  and  general  purposes. 

DETAILS   OP   POWER   TRANSMISSION   SYSTEMS 

(See  general  instructions,  section  13) 

Cables.  Span  wires. 

Cut-outs  (not  at  power  houses  and  Switchboards  (not  at  power  houses 

substations).  and  substations). 

Feed  wires.  Transformers  (not  at  power  houses 

Guard  wires.  and  substations). 
Insulators  and  connections. 

Note. — When  the  electric  current  generated  or  received  is  changed 
by  means  of  (a)  rotary  converters,  (6)  motor  generator  sets,  or  (c)  static 
transformers  (substation  apparatus),  that  portion  of  the  line  or  outside 
conductor  system  carrying  current  of  other  than  the  operating  kind  or 
voltage  shall  be  classed  as  transmission  system.  When  the  electric 
current  is  generated  or  received  and  used  substantially  unchanged  in 
voltage  and  kind,  the  line  or  outside  conductor  system,  including  any 
feeders,  trolley  wires,  booster  circuits,  and  supplementary  return,  shall 


226  APPENDIX  A 

be  classed  wholly  as  distribution  system.    Tie  lines  between  generating 
stations  and  substations  shall  follow  the  same  rule  as  other  lines. 

32.  POWER  DISTRIBUTION  SYSTEMS. 

This  account  shall  include  the  cost  of  distribution  systems, 
whether  overhead,  surface,  or  underground,  for  conveying  low- 
tension  electric  power  from  producing  plants  or  transformer 
stations  and  for  conveying  steam  and  compressed-air  from  pro- 
ducing plants  to  the  place  where  used  for  propelling  trains  and 
cars,  or  for  power,  heat,  light,  and  general  purposes. 

DETAILS   OF   POWER   DISTRIBUTION   SYSTEMS 

(See  general  instructions,  section  13) 

Compressed-air  pipe  lines.  Span  wires. 
Gut-outs    (not    at    power    houses       Steam  pipe  lines. 

and  substations).  Switchboards  (not  at  power  houses 

Feed  wires.  and  substations). 

Guard  wires.  Third  rail. 

Insulators  and  connections.  Third-rail  braces. 

Overhead  trolley  wires.  Third-rail  insulation  and  protec- 

Rail  bond  plugs.  tion. 

Rail  bonds.  Third-rail  supports. 
Rail-insulating  devices. 

Note  A. — The  cost  of  track  material  such  as  insulated  rail  splices 
used  in  connection  with  distribution  systems  shall  be  charged  to  account 
No.  10,  "Other  track  material." 

Note  B. — The  cost  of  the  portions  of  distribution  systems  located 
within  shop  buildings  and  station  and  office  buildings  shall  be  included 
in  the  cost  of  the  buildings.  The  cost  of  distribution  systems  in  plants 
used  exclusively  for  operating  signals  and  interlockers  shall  be  included 
in  account  No.  27,  "Signals  and  interlockers." 

Note  C. — When  the  electric  current  generated  or  received  is  changed 
by  means  of  (a)  rotary  converters,  (6)  motor  generator  sets,  or  (c)  static 
transformers  (substation  apparatus),  that  portion  of  the  line  or  outside 
conductor  system  carrying  current  of  other  than  the  operating  kind  or 
voltage  shall  be  classed  as  transmission  system.  When  the  electric  cur- 
rent is  generated  or  received  and  used  substantially  unchanged  in  volt- 
age and  kind,  the  line  or  outside  conductor  system,  including  any  feeders, 
trolley  wires,  booster  circuits,  and  supplementary  return,  shall  be  classed 
wholly  as  distribution  system.  Tie  lines  between  generating  stations 
and  substations  shall  follow  the  same  rule  as  other  lines. 

33.  POWER  LINE  POLES  AND  FIXTURES. 

This  account  shall  include  the  cost  of  poles,  cross  arms,  in- 
sulating pins,  brackets,  and  other  pole  fixtures;  braces  and  other 
supports  for  holding  the  poles  in  position;  and  structures  for 
supporting  the  overhead  electric  construction. 


APPENDIX  A  227 

34.  UNDERGROUND  CONDUITS. 

This  account  shall  include  the  cost  of  conduits  required  for 
underground  wires  and  cables  of  electric  railway  construction, 
including  manholes,  sewer  connections,  sewer  traps,  and  all  de- 
tails necessary  for  the  completion  of  the  conduit  system. 

35.  MISCELLANEOUS  STRUCTURES. 

This  account  shall  include  the  cost  of  all  permanent  structures 
not  provided  for  elsewhere,  including  all  fixtures  and  furniture 
to  equip  them  for  use. 

36.  PAVING. 

This  account  shall  include  the  cost  of  paving  about  tracks  in 
public  highways  through  which  the  carrier's  tracks  are  laid. 

Note. — The  cost  of  paving  upon  the  carrier's  lands,  within  the  grounds 
of  buildings  or  other  structures,  shall  be  included  in  the  accounts  pro- 
vided for  the  cost  of  the  structures.  The  cost  of  paving  upon  the  carrier's 
right  of  way  at  crossings  shall  be  included  in  account  No.  15,  "Cross- 
ings and  signs." 

37.  ROADWAY  MACHINES. 

This  account  shall  include  the  cost  of  the  initial  outfit  of  road- 
way machines  provided  for  the  maintenance  of  roadway  and 
structures  at  the  time  the  road  is  opened  for  commercial  traffic, 
and  the  cost  of  additional  roadway  machines  acquired  subse- 
quently. 

LIST   OP   ROADWAY   MACHINES 

(See  general  instructions,  section  13) 

Boilers,  portable.  Grading  outfits. 

Cars,  hand.  Hydraulic  outfits. 

Cars,  lever.  Jacks,  hydraulic. 

Cars,  motor  inspection.  Log  loaders. 

Cars,  push.  Pile  drivers. 
Cars    (small),    crane,    for   supply       Plows,  unloading. 

yards  and  general  use.  Rail  unloaders. 

Concrete  mixers.  Rock  crushers. 

Ditching  machines.  Steam  rollers. 

Dredging  machines.  Timber  trucks. 

Engines,  portable.  Velocipedes. 

Note  A. — When  an  important  addition  and  betterment  project  or  the 
construction  of  a  new  line  necessitates  the  purchase  of  roadway  machines 
to  be  used  exclusively  thereon,  the  cost  shall  be  included  in  the  accounts 


APPENDIX  A 


to  which  the  cost  of  the  work  is  charged.  The  amount  realized  from  any 
subsequent  sale,  or  the  appraised  value  of  the  machines  retained  after 
the  completion  of  the  special  work  for  which  they  were  purchased,  shall 
be  credited  to  the  accounts  charged  with  the  cost  thereof.  The  appraised 
value  of  such  machines  retained  shall  be  debited  to  this  account  and 
thereafter  considered  as  the  cost  of  such  property. 

Note  B. — The  cost  of  machines  for  the  equipment  of  roadway  shops 
shall  be  included  in  account  No.  17,  "Roadway  buildings,"  as  provided 
for  therein. 

Note  C. — The  cost  of  roadway  machines,  such  as  pile  drivers,  log 
loaders,  hoist  engines,  and  concrete  mixers,  when  permanently  mounted 
for  movement  on  the  carrier's  tracks,  shall  be  included  in  account  No.  67, 
"Work  equipment." 

38.  ROADWAY  SMALL  TOOLS. 

This  account  shall  include  the  cost  of  the  initial  outfit  of  road- 
way and  track  small  tools  provided  for  the  maintenance  of  way 
and  structures  at  the  time  the  road  is  opened  for  commercial 
traffic;  also  the  initial  outfit  of  such  tools  provided  for  the  main- 
tenance of  extensions  of  such  road. 


LIST   OF   KOADWAY   TOOLS 

(See  general  instructions,  section  13) 

Adzes.  Drills,  portable. 

Anvils.  Flags,  signal. 

Augers.  Furnaces,  portable. 

Axes.  Grindstones. 

Ballast  forks.  Hammers,  napping. 

Bars,  claw.  Hammers,  paving. 

Bars,  crow.  Hammers,  spiking. 

Bars,  lining.  Handles  for  tools. 

Bars,  pinch.  Hatchets. 

Bars,  raising.  Hoes. 

Bars,  tamping.  Jack  levers. 

Braces  and  bits.  Jacks,  ratchet. 

Brooms.  Jacks,  screw. 

Brush  hooks.  Jacks,  track. 

Cable  stretchers.  Kegs,  water. 

Cables.  Ladders. 

Cans,  oil.  Lanterns  and  fixtures. 

Cans,  water.  Lawn  mowers. 

Cant  hooks.  Levels. 

Chains.  Lines  for  ditching. 

Chisels,  track.  Nippers. 

Chisels,  wood.  Oilstones. 

Curbing  hooks.  Padlocks. 

Dippers.  Pails,  water. 

Drawing  knives.  Paint  brushes. 

Drill  bits.  Picks,  clay. 


APPENDIX  A  229 

Picks,  tamping.  Spike  pullers. 

Pike  poles.  Spot  boards. 

Post-hole  diggers.  Squares. 

Post-hole  tampers.  Straightening  machines. 

Punches.  Tape  lines. 

Rail  benders.  Thermometers  for  laying  rail. 

Rail  tongs.  Tongs. 

Rakes.  .^.  Tool  boxes. 

Rope.  '^  Torches. 

Saws,  crosscut.  Track  gauges. 

Saws,  hand.  Track  levels. 

Scrap  boxes.  Vises. 

Scythes.  Weed  spuds. 

Shovels.  Wheelbarrows. 

Sickles.  Whetstones. 

Sledges.  Wood  mallets. 

Spades.  Wrenches,  monkey. 

Spike  mauls.  Wrenches,  track. 

Note. — The  cost  of  roadway  and  track  small  tools  of  which  no  specific 
record  is  kept  shall  be  charged  when  acquired  to  an  appropriate  ma- 
terials and  supplies  account,  from  which  they  shall  be  charged  as  issued 
to  the  appropriate  road  and  equipment,  operating  expense,  or  other  ac- 
counts. When  such  tools  are  used  both  for  construction  and  maintenance 
work  the  cost  shall  be  equitably  apportioned  among  the  accounts  pro- 
vided for  the  two  classes  of  work. 

39.  ASSESSMENTS  FOR  PUBLIC  IMPROVEMENTS. 
This  account  shall  mclude  the  carrier's  proportion  of  the  cost 

of  constructing  public  improvements — such  as  grading,  sewering, 
curbing,  guttering,  paving,  and  sidewalks — and  other  public 
improvements,  including  the  cost  of  such  improvements  if  made 
by  the  carrier's  own  employees  under  Government  requirements. 

Note  A. — The  cost  of  paving  required  by  Government  authority  be- 
tween rails  and  adjacent  to  tracks  laid  through  public  highways  shall  be 
included  in  account  No.  36,  "Paving." 

Note  B. — The  carrier's  proportion  of  the  cost  of  maintaining  such 
public  improvements  shall  be  included  in  operating  expenses. 

40.  REVENUES  AND  OPERATING  EXPENSES  DURING 
CONSTRUCTION. 

This  account  shall  include  the  cost  of  operating  a  piece  of 
road  during  the  period  before  the  regular  operation  of  revenue 
trains,  including  rent  and  repairs  of  equipment  used  in  commer- 
cial service  during  such  period.  It  includes  the  cost  of  running 
construction  trains  over  such  section  of  road  when  the  cost  of 


230  APPENDIX  A 

operating  such  trains  can  not  properly  be  charged  to  any  specific 
account. 

To  this  account  shall  be  credited  amounts  collected  for  rents 
of  buildings  and  other  properties  and  for  the  transportation  of 
commercial  freight  or  of  passengers  on  construction  trains;  also 
the  net  profits  from  boarding  and  commissarial  outfits,  and  other 
sources  of  operating  revenue. 

Carriers  which  wish  to  subdivide  this  account  shall  use  ap- 
propriate subaccounts  corresponding  to  accounts  prescribed  in 
the  operating  revenue,  operating  expense,  or  income  account 
classifications. 

41.  COST  OF  ROAD  PURCHASED. 

This  account  shall  include  the  cash  cost  of  any  road  or  por- 
tion thereof  purchased.  Where  the  contract  of  purchase  in- 
cludes not  only  road,  but  also  equipment,  securities,  and  other 
assets,  the  appraised  value  of  such  equipment,  securities,  and 
other  assets  shall  be  deducted  from  the  total  cash  cost,  and  the 
remainder  of  the  cash  cost  shall  be  charged  to  this  account. 
Where  the  consideration  given  for  the  property  purchased  is 
other  than  cash,  such  consideration  shall  be  valued  on  a  current 
cash  basis.  If  the  consideration  includes  the  assumption  of  lia- 
bilities, such  liabilities  shall  be  included  in  the  determination 
of  the  cost  at  their  cash  value  at  the  time  the  contract  is  made. 

This  account  shall  be  used  only  as  a  clearing  account  in  which 
temporarily  to  carry  the  cost  of  road  purchased  until  such  time 
as  a  plan  for  distributing  such  cost  to  the  primary  accounts  ap- 
propriate for  the  property  is  approved  by  the  Commission. 

Note  A. — The  appraised  value  of  any  equipment  thus  acquired  shall 
be  charged  to  the  appropriate  equipment  accounts.  The  value,  at  time 
of  purchase,  of  any  securities,  or  other  assets  acquired,  shall  be  included 
in  the  accounts  appropriate  for  such  assets.  The  par  value  of  any  lia- 
bilities assumed  shall  be  included  in  the  appropriate  liability  accounts, 
and  the  necessary  adjustments  between  the  cash  value  charged  to  the 
property  accounts  and  the  par  value  shall  be  made  in  the  appropriate 
premium  or  discount  account. 

Note  B. — The  carrier  shall  be  prepared  to  furnish  the  Commission, 
upon  demand,  a  full  report  of  the  contract  of  acquisition  of  each  road, 
or  portion  thereof,  purchased,  and  a  statement  showing  in  detail  the 
consideration  given  therefor.  It  should  procure,  in  connection  with  the 
acquisition  of  any  such  road  and  equipment,  all  existing  records,  mem- 


APPENDIX  A  231 

oranda,  and  accounts  in  possession  or  control  of  the  grantor,  relating  to 
the  construction  and  improvements  of  such  road  and  equipment,  and 
shall  preserve  such  records,  memoranda,  and  accounts  until  authorized 
by  law  to  destroy  or  otherwise  dispose  of  them.  Where  the  records, 
memoranda,  and  accounts  are  so  intimately  involved  with  other  records, 
memoranda,  and  accounts  of  the  grantor  as  to  make  their  transfer  im- 
practicable or  inadvisable,  certified  copies  of  them  shall  be  procured  and 
retained  by  the  grantee.  The  verity  of  the  copies  should  be  certified  by 
the  custodian  of  the  originals. 

42.  RECONSTRUCTION  OF  ROAD  PURCHASED. 
When  a  road  is  purchased  and  the  fixed  improvements  ac- 
quired are  in  such  a  physical  condition  that  it  is  necessary  sub- 
stantially to  rebuild  the  road  in  order  to  bring  it  up  to  the  stand- 
ard required  by  the  carrier,  the  cost  of  such  rebuilding  shall  be 
charged  to  this  account. 

Note  A. — A  comprehensive  statement  of  the  estimated  amount 
necessary  to  reconstruct  a  road  in  accordance  with  the  above  provision 
shall  be  made  to  the  Commission  as  soon  as  the  estimate  is  made. 

Note  B. — When  the  work  of  reconstruction  of  road  purchased  is  com- 
pleted, the  cost  thereof  shall  be  credited  to  this  account  and  charged  to 
other  primary  accounts  of  this  classification  appiopriate  for  the  expendi- 
tures made. 

43.  OTHER  EXPENDITURES— ROAD. 

This  account  shall  include  items  which  can  not  properly  be 

included  in  any  of  the  foregoing  accounts  as  a  part  of  the  cost 

of  any  specific  work,  such  as  the  cost  of  transportation  of  men, 

materials,  supplies,  and  equipment  over  the  carrier's  own  line; 

amounts  paid  for  rent  and  repairs  of  equipment  and  for  injuries 

to  persons  incident  to  and  in  connection  with  original  road,  road 

extensions,  or  additions  and  betterments;  and  analogous  items. 

When  assignable,  such  expenditures  shall  be  included  in  the  cost 

of  the  property  in  connection  with  which  the  expenditure  occurs. 

Note. — Rents  paid  for  and  repairs  made  to  equipment  used  in  com- 
mercial operations  during  the  period  before  the  regular  operation  of 
revenue  trains  shall  be  charged  to  account  No.  40,  "Revenues  and 
operating  expenses  during  construction." 

44.  SHOP  MACHINERY. 

This  account  shall  include  the  cost  of  machinery  and  other 
apparatus  in  shops  and  enginehouses,  including  the  cost  of  spe- 
cial foundations  and  installation,  and  cost  of  small  hand  tools 
necessary  first  to  equip  a  shop. 


232 


APPENDIX  A 


LIST   OF   SHOP   MACHINBRT 

(See  general  instructions,  section  13) 


Air  compressors. 
Ash  conveyors. 
Belting. 
Blowers- 
Boilers  for  furnishing  power. 
Boring  machines. 
Cars,  motor. 
Cars,  push. 
Cranes. 
Drill  presses. 
Drilling  machines. 
Drop  tables. 
Forges. 

Framing  machines. 
Furnaces. 

Grinding  and  polishing  machines. 
Hoists. 

Hydraulic  jacks. 
Lathes. 
Lifting  magnets. 

Note  A. — The  cost  of  power  plant  machinery  and  other  apparatus 
for  shop  purposes,  when  located  in  distinct  buildings,  shall  be  included  in 
account  No.  45,  "Power  plant  machinery." 

Note  B. — The  cost  of  foundations  other  than  those  special  to  par- 
ticular machines  and  other  apparatus  shall  be  included  in  the  cost  of  the 
building,  and  not  in  this  account. 

45.  POWER  PLANT  MACHINERY. 

This  account  shall  include  the  cost  of  machinery  and  other 
apparatus  for  generating  power  in  power  plants  used  for  the 
operation  of  trains  and  cars,  or  to  furnish  power,  heat,  and  light 
for  stations,  shops,  or  general  purposes,  including  the  cost  of 
special  foundations  and  installation. 


Metal  chimneys. 
Milling  machines. 
Motors. 

Pipe  cutting  and  threading  ma- 
chines. 
Planers. 

Pneumatic  hammers. 
Power  equipment. 
Punches. 
Riveters. 
Saws. 
Shafting. 
Shapers. 
Slotters. 

Stationary  engines. 
Steam  hammers. 
Vises. 

Welding  machines. 
Woodworking  machine*. 


DETAILS   OF   POWEB   PLANT   MACHINERY 

(See  general  instructions,  section  13) 


Ammeters. 

Batteries. 

Belting. 

Boiler-room  appliances  and  tools. 

Boilers  and  fittings. 

Boosters. 

Cables. 

Circuit  breakers. 

Clutches. 

Conductors. 


Cranes. 
Cut-outs. 
Draft  machinery. 
Dynamos. 
Economizers. 

Electric-power    distribution     sys- 
tems, interior. 
Engine-room  appliances  and  tools. 
Feed-water  heaters. 
Furnaces. 


APPENDIX  A  233 

Generatorg.  Rheostats. 

Globes.  Sewer  connections. 

Hangers.  Shafting. 

Heating  apparatus.  Stationary  engines. 

Hoists.  Steam  distribution  systems. 

Insulators.  Steam  fittings. 

Lamps.  Switchboards. 

Lighting  apparatus.  Tanks. 

Lubricating  devices.  Transformers. 

Machinery  and  foundation*.  Turbines, 

Mechanical  stokers.  Voltmeters. 

Piping.  Water  meters. 

Poles.  Water  wheels. 

Pumps.  Wires  from  generators  or  trans- 
Purifiers,  formers  to  switchboard. 

NoTB  A. — The  cost  of  power  machinery  and  other  apparatus  installed 
in  a  shop  as  part  of  the  shop  equipment  shall  be  included  in  account 
No.  44,  "Shop  machinery." 

Note  B. — The  cost  of  power  machinery  and  other  apparatus  installed 
in  stations  and  oflSices  and  used  solely  for  station  and  office  purposes 
shall  be  included  in  account  No.  16,  "Station  and  office  buildings." 

Note  C. — The  cost  of  power  machinery  and  other  apparatus  in  plants 
used  solely  for  operating  signals  and  interlockers  shall  be  included  in 
account  No.  27,  "Signals  and  interlockers." 

Note  D. — The  cost  of  foundations  other  than  those  special  to  par- 
ticular machines  and  other  apparatus  shall  be  included  in  the  cost  of 
the  building,  and  not  in  this  account. 


46.  POWER  SUBSTATION  APPARATUS. 

This  account  shall  include  the  cost  of  machinery  and  other 
apparatus,  including  the  cost  of  special  foundations  and  installa- 
tion, for  transforming  or  storing  power  in  power  substations  used 
for  the  operation  of  trains  and  cars,  and  for  power,  heat,  and 
light  for  stations,  shops,  or  general  purposes. 

details  of  power  substation  apparatus 

(See  general  instructions,  section  13) 

Rotary  converters.  Switchboards. 

Storage  batteries.  Transformers. 

Note  A. — The  cost  of  constructing  machinery  and  other  apparatus 
for  transforming  or  storing  power  shall  be  included  in  account  No.  45, 
"  Power  plant  machinery,"  when  such  equipment  is  contained  in  a  power 
plant. 

Note  B. — The  cost  of  foundations  other  than  those  special  to  par- 
ticular machines  and  other  apparatus  shall  be  included  in  the  cost  of 
the  building,  and  not  in  this  account. 


234  APPENDIX  A 

47.  UNAPPLIED  CONSTRUCTION  MATERIAL  AND 
SUPPLIES. 

This  account  shall  include  the  cost  of  material  and  supplies 
located  at  the  point  of  use  which  have  been  purchased  for  pro- 
jected new  roads  and  road  extensions. 

The  purpose  of  this  account  is  to  exclude  from  the  current 
assets  the  cost  of  supplies  and  unapplied  material  which  are 
located  for  use  on  projected  new  roads  and  roads  extensions, 
under  the  condition  that  the  material  will  not  be  used  for  other 
purposes. 

Note  A. — Material  and  supplies  designed  for  projected  new  roads 
and  road  extensions  which  are  carried  in  storehouses  and  store  yards 
and  included  in  the  general  stock  of  an  operating  company  shall  be  in- 
cluded in  balance-sheet  account  No.  716,  "Materials  and  supplies." 

Note  B. — The  cost  of  unappUed  materials  and  supplies  on  hand  at 
the  completion  of  construction  work  shall  be  transferred  to  balance- 
sheet  account  No.  716,  "Materials  and  supplies." 

n.  EQUIPMENT. 

The  several  primary  accounts  included  in  this  general  account 
are  designed  to  show  the  cost  of  the  several  classes  of  equip- 
ment owned  by  the  carrier,  or  held  under  equipment  trust 
agreements  for  purchase. 

To  the  appropriate  primary  accounts  in  this  general  account 
shall  be  charged  the  cost  of  all  equipment,  such  as  steam  locomo- 
tives, electric  locomotives,  passenger-train  cars,  freight-train 
cars,  work  equipment,  floating  equipment,  and  the  necessary 
appurtenances,  furniture,  and  fixtures  first  to  equip  for  service, 
including  the  cost  of  inspection,  setting  up,  and  trying  out,  and 
transportation  over  foreign  lines;  also  the  cost  of  additions,  such 
as  headhghts,  mechanical  stokers,  power  brakes,  vestibules, 
machinery  for  self-propulsion,  heating  and  fighting  apparatus, 
and  the  fike;  and  the  excess  cost  of  betterments,  such  as  im- 
proved appHances,  parts,  or  appurtenances,  over  the  cost  at 
current  prices  (as  new)  of  the  appHances,  parts,  or  appurtenances 
removed.  The  cost  of  removing  the  old  appUances  and  apply- 
ing the  improved  shall  be  charged  to  Operating  Expenses. 

The  ledger  value  of  each  unit  of  equipment  shall  be  credited 
to  the  appropriate  equipment  account  when  it  is  retired  from" 


APPENDIX  A  235 

service.  The  amount  of  this  credit  shall  be  concurrently  charged 
as  follows: 

The  amount  of  the  balance  in  the  balance-sheet  accrued  de- 
preciation account  with  respect  to  the  equipment  thus  retired 
shall  be  charged  to  that  account;  the  salvage  recovered  shall  be 
charged  to  the  materials  and  suppHes  account  or  elsewhere, 
according  to  the  purpose  for  which  used;  the  amount  of  de- 
preciation prior  to  July  1,  1907,  not  previously  written  off  or 
provided  for,  shall  be  charged  to  Profit  and  Loss;  and  the  re- 
mainder shall  be  charged  to  the  appropriate  operating  expense 
account  for  equipment  retired.  The  cost  of  demoUshing  the 
equipment,  if  demolished  by  or  for  the  carrier,  shall  be  charged 
to  the  appropriate  operating  expense  account  for  equipment 
retirements. 

When  the  cost  of  the  renewals  to  be  made  to  any  unit  of  equip- 
ment will  constitute  the  major  portion  of  its  value  as  renewed, 
when  taken  out  of  service,  shall  be  considered  as  retired  and 
accounted  for  as  provided  in  the  preceding  paragraph,  and  for 
the  purpose  of  this  classification  the  renewed  equipment  shall 
be  considered  an  addition  and  the  appraised  cost  thereof  shall 
be  included  in  the  account  appropriate  for  the  cost  of  the  equip- 
ment. In  no  case  shall  the  charge  for  the  renewed  equipment 
exceed  the  cost  (at  current  market  prices  of  labor  and  material) 
of  new  equipment  of  similar  type,  equal  capacity,  and  equal 
expectation  of  life  in  service,  less  a  suitable  allowance  on  account 
of  the  secondhand  parts  remaining  therein. 

When  equipment  of  one  class  is  converted  so  as  to  be  includible 
in  another  class,  the  accounting  shall  be  as  provided  in  general 
instructions,  section  11. 

When  an  important  addition  and  betterment  project  or  the 
construction  of  new  lines  necessitates  the  purchase  of  equip- 
ment to  be  used  exclusively  therein,  the  cost  of  such  equipment 
shall  be  included  in  the  accounts  representing  the  cost  of  the 
work,  and  no  charge  shall  be  made  to  Operating  Expenses  for  de- 
preciation on  such  equipment  while  the  cost  remains  so  charged. 
The  amount  reahzed  from  any  subsequent  sale,  or  the  appraised 
value  of  the  equipment  retained  after  the  completion  of  the 
special  work  for  which  it  was  purchased,  shall  be  credited  to  the 


236  APPENDIX  A 

accounts  charged  with  its  cost.  The  appraised  value  of  such 
equipment  retained  shall  be  debited  to  the  appropriate  primary 
account  herein,  and  thereafter,  for  the  purposes  of  accounting, 
such  appraised  value  shall  be  considered  as  the  cost  of  the  equip- 
ment. 

When  secondhand  equipment  acquked  is  in  such  physical 
condition  that  it  is  necessary  to  make  extensive  repairs  to  it  to 
bring  it  up  to  the  standard  required  by  the  carrier,  the  cost  of 
such  repairs  shall  be  included  in  the  account  appropriate  for  the 
cost  of  the  equipment.  A  comprehensive  statement  of  the 
amount  estimated  to  be  necessary  to  rebuild  secondhand  equip- 
ment in  accordance  with  the  above  provision  shall  be  furnished 
to  the  Commission  as  soon  as  the  estimate  is  made. 

51.  STEAM  LOCOMOTIVES. 

This  account  shall  include  the  cost  of  steam  locomotives  and 
tenders,  purchased  or  built  by  the  carrier,  and  of  appurtenances, 
furniture,  and  fixtures  necessary  to  equip  them  for  service,  in- 
cluding the  cost  of  inspection,  setting  up,  and  trying  out  after 
receipt  from  builders,  and  transportation  charges  to  the  carrier's 
line. 

LIST   OF  APPUKTENANCE8   TO   LOCOMOTIVES 

(See  general  instructions,  section  13) 

Air-brake  equipment  and  hose.  Metallic  packing. 

Arm  rests.  Pneumatic  sanding  equipment. 

Awnings.  Seat  boxes. 

Brake  fixtures.  Signal  lamps. 

Cab  cushions.  Speed  recorders. 

Cab  lamps.  Steam-gauge  lamps. 

Clocks.  Steam-heat  equipment  and  hose. 

Coal  boards.  Storm  doors. 

Fire-extinguishing  apparatus.  Tool  boxes. 

Gongs.  Train-signal  equipment  and  hose. 
Head  lamps. 

52.  OTHER  LOCOMOTIVES. 

This  account  shall  include  the  cost  of  locomotives  other  than 
steam,  purchased  or  built  by  the  carrier,  and  of  appurtenances, 
furniture,  and  fixtures  necessary  to  equip  them  for  service,  in- 
cluding inspection,  setting  up,  and  trying  out  after  receipt  from 
builders,  and  transportation  charges  to  the  carrier's  hne. 

Note. — Gars  with  motor  equipment  are  not  to  be  classed  as  locomo- 
tives. 


APPENDIX  A  237 

63.  FREIGHT-TRAIN  CARS. 

This  account  shall  include  the  cost  of  freight-train  cars  of  all 
classes,  including  motor-driven  cars,  purchased  or  built  by  the 
carrier,  including  all  appurtenances,  furniture,  and  fixtures 
necessary  to  equip  them  for  service,  and  the  cost  of  inspection 
and  transportation  charges  to  the  carrier's  line. 

LIST   OF  rBBIQHT-TBAIN   CABS 

(See  general  instructions,  section  13) 


Ballast  (commercial). 

Gun  truck. 

Beer. 

Hay. 

Box. 

Lime. 

Cabin. 

Logging. 

Caboose. 

Oil  tank. 

Charcoal. 

Ore. 

Coal. 

Platform. 

Coke. 

Poling. 

Dump  (commercial). 

Poultry. 

Flat. 

Produce. 

Fruit. 

Rack. 

Furniture. 

Refrigerator. 

Gondola. 

Stock. 

Gondola  (hopper). 

Tank  and  water  (when 

Gondola  (long). 

commercial  cars). 

LIST  OF  APPUBTENANCES  TO  FBEIQHT-TBAIN   CABS 

(See  general  instructions,  section  13) 

Air-brake     equipment,     including  Lamps  and  fixtures. 

hose.  Seats. 

Cooking  equipment  and  utensils.  Speed  recorders. 

Cushions.  Train-signal  equipment,  including 
Heating  equipment.  hose. 

Ice  boxes.  Water  tanks. 

Note. — The  cost  of  motor  equipment  of  cars  shall  be  included  in  ac- 
count No.  55,  "Motor  equipment  of  cars." 

54.  PASSENGER-TRAIN  CARS. 

This  account  shall  include  the  cost  of  passenger-train  cars 
of  all  classes,  including  motor-driven  cars,  purchased  or  built  by 
the  carrier,  including  all  appurtenances,  furniture,  and  fixtures 
necessary  to  equip  them  for  service,  and  cost  of  inspection  and 
transportation  charges  to  the  carrier's  line. 


^38 


APPENDIX  A 


LI8T  OF  PASSENQKR-TBAIN   CARS 


(See  general  instructions,  section  13) 


Baggage. 

Baggage-express. 

Baggage-mail. 

Baggage-mail-express. 

Buffet. 

Caf6. 

Chair. 

Club. 

Colonist. 

Dining. 

Express. 

Immigrant. 

Library. 


Mail. 

Milk. 

Observation. 

Parlor. 

Parlor-baggage. 

Passenger. 

Passenger-baggage. 

Passenger-baggage-mail. 

Postal. 

Refrigerator-express. 

Sleeping. 

Smoking. 

Tourist. 


LIST  OP  APPURTENANCES  TO   PA8SENGEB-TBAIN  CARS 

(See  general  instructions,  section  13) 


Air-brake    equipment,     including 

hose. 
Bedding. 
Chairs. 
Coat  hooks. 
Curtains  and  fixtures. 
Cushions. 
Electric  bells. 
Floor  coverings. 
Heating  equipment. 
Ice  boxes. 
Ice  tanks. 

Kitchen  equipment  and  utensils. 
Lighting  equipment. 


Mail  catchers. 

Parcel  racks. 

Ranges  and  boilers. 

Seats. 

Speed  recorders. 

Steam-heat  hose. 

Table  china. 

Table  glassware. 

Table  linen. 

Table  silver. 

Toilet  equipment. 

Train-signal  equipment,  including 

hose. 
Water  tanks. 


Note. — The  cost  of  motor  equipment  of  cars  shall  be  included  in  ac- 
count No.  55,  "Motor  equipment  of  cars." 

55.  MOTOR  EQUIPMENT  OF  CARS. 

This  account  shall  include  the  cost  of  motor  equipment  of  all 
cars,  including  the  wiring  for  such  electric  equipment. 


DETAILS   OF   MOTOR   EQUIPMENT 

(See  general  instructions,  section  13) 

Batteries,  storage.  Overload  switches. 
Circuit  breakers.  Rheostats. 
Controllers.  Switches. 
Engines,  internal-combustion.  Third-rail  contact- 
Generators.  Trolley  poles. 
Lightning  sirresters.  Trolleys, 
Motors, 


APPENDIX  A 


239 


56.  FLOATING  EQUIPMENT. 

This  account  shall  include  the  cost  of  marine  or  floating  equip- 
ment of  all  kinds  except  work  equipment,  purchased  or  built 
by  the  carrier,  including  all  appurtenances,  furniture,  and  fix- 
tures necessary  to  equip  it  for  service,  and  cost  of  inspection 
and  transportation  charges  to  the  carrier's  line. 

LIST   OF   FLOATINQ   EQUIPMENT 

(See  general  instructions,  section  13) 

Barges.  Power  lighters. 

Canal  boats.  Scows. 

Car  and  other  floats.  Steamboats. 

Ferryboats.  Steamships. 

Lighters.  Transfer  boats. 

Power  launches.  Tugboats. 

LIST   OF  APPURTENANCES   TO   FLOATING   EQUIPMENT 

(See  general  instructions,  section  13) 


Anchors. 

Axes. 

Barometers. 

Beds  and  bedding. 

Binnacle  lamps. 

Blocks  and  tackle. 

Boilers  and  foimdations. 

Cables. 

Capstan  bars. 

Carpets. 

Charts. 

China,  crockery,  and  glassware. 

Chronometers. 

Clocks. 

Compasses. 

Counters. 

Desks. 

Engines  and  foundations. 

Fire  buckets. 

Fire  extinguishers. 

Floor  coverings. 

Flue  cleaners. 

Furniture. 

Gangplanks. 

Hatchets. 

Heating  equipment. 

Hoisting  equipment. 

Hooks. 

Keys. 

Kitchen  equipment. 

Life  preservers. 


Lighting  equipment. 
Linen. 
Lines. 
Logs. 

Machinery  and  foundations. 
Masts. 
Oil  cans. 

Pianos    and    other    musical    in- 
struments. 
Pumps. 
Racks. 
Railings. 
Rakes. 
Rigging. 
Safes. 
Sails. 
Scales. 

Seats,  chairs,  and  cushions. 
Shovels. 

Slice  bars  and  pokers. 
Spyglasses. 

Steam  distribution  systems. 
Steering  equipment. 
Telescopes. 
Ticket  cases. 
Tool  boxes. 
Tools,  miscellaneous. 
Tracks  on  car  floats. 
Ventilating  equipment. 
Wrenches. 


240 


APPENDIX  A 


67.  WORK  EQUIPMENT. 

This  account  shall  include  the  cost  of  work  equipment,  in- 
cluding motor-driven  equipment,  purchased  or  built  by  the 
carrier;  cost  of  appurtenances,  furniture,  and  fixtures  necessary 
to  equip  it  for  service,  and  cost  of  inspection  and  transportation 
charges  to  the  carrier's  line. 

LIST   OF   BAIL   WORK   EQUIPMENT 

(See  general  instructions,  section  13) 


Air-brake  instruction  cars. 

Painters'  cars. 

Ballast  cars. 

Pay  cars. 

Ballast  unloader  cars. 

Pile  drivers  (mounted). 

Boarding  cars. 

Rail  saws  (mounted). 

Bridge  cars. 

Salt  cars. 

Business  cars. 

Sanding  cars. 

Camp  cars. 

Scale  test  cars. 

Cinder  cars. 

Scraper  cars. 

Concrete  mixers  (mounted). 

Snow  dozers. 

Derrick  cars. 

Snow  drags. 

Dirt  spreaders  (mounted). 

Snow  plows   (moved  by  but  not 

Ditching  cars. 

attached  to  locomotives). 

Dump  cars. 

Springling  cars. 

Dynamometer  cars. 

Steam  shovels. 

Gas  tank  cars. 

Steam  wrecking  derricka. 

Grading  cars. 

Supply  cars. 

Gravel  cars. 

Sweeper  cars. 

Indicator  cars. 

Tool  cars. 

Locomotive    tanks    used    perma- 

Tool and  block  cars. 

nently  as  water  cars. 

Water  cars. 

Locomotives. 

Weed  burners  (mounted). 

Officers'  cars. 

Wrecking  cars. 

Outfit  cars. 

LIST   OP  PLOATINQ 

WORK   EQUIPMENT 

(See  general  instructions,  section  13) 

Derricks. 

Pile  drivers. 

Dredges. 

APPUBTBNANCES   TO   FLGATINQ    WORK   EQUIPMENT 

(See  general  instructions,  section  13) 

Anchors. 

Cushions. 

Axes. 

Desks. 

Barometers. 

Engines  and  foundations. 

Beds  and  bedding. 

Fire  extinguishers. 

Blocks  and  tackle. 

Fire  buckets. 

Boilers  and  foundations. 

Floor  coverings. 

Cables. 

Flue  cleaners. 

China,    crockery,    and   glassware. 

Gangplanks. 

Compasses. 

Hatchets. 

APPENDIX  A  Ul 

Heating  equipment.  Rakes. 

Hoisting  equipment.  Rigging. 

Hooks.  Sails. 

Keys.  Seats  and  chairs. 

Life  preservers.  Shovels. 

liighting  equipment.  Slice  bars  and  pokers. 

Linen.  Steam  distribution  systems. 

Lines.  Steering  equipment. 

Machinery  and  foundation*.  Tool  boxes. 

Masts.  Tools,  miscellaneous. 

Oil  cans.  Wrenches. 

Pumps. 

Note. — The  cost  of  motor  equipment  of  cars  shall  be  included  in  ac- 
count No.  55,  "Motor  equipment  of  cars." 


58.  MISCELLANEOUS  EQUIPMENT. 

This  account  shall  include  the  cost  of  horses  and  harness;  and 
cost  of  wagons,  automobiles,  and  other  highway  vehicles. 

in.  GENERAL  EXPENDITURES. 

The  primary  accounts  of  this  general  account  are  designed  to 
include  expenditures  made  in  connection  with  the  acquisition 
and  construction  of  original  road  and  equipment,  and  with  ex- 
tensions, additions,  and  betterments  to  road  and  equipment 
property,  when  such  expenditures  can  not  properly  be  included 
in  any  of  the  foregoing  accounts  as  a  part  of  the  cost  of  any 
specific  work.  When  assignable,  such  expenditures  shall  be 
included  in  the  cost  of  the  property  in  connection  with  which 
the  expenditures  occur. 

71.  ORGANIZATION  EXPENSES. 

This  account  shall  include  all  fees  paid  to  governments  for  the 
privilege  of  incorporation,  and  office  and  other  expenditures 
incident  to  organizing  the  corporation  and  putting  it  in  readiness 
to  do  business;  cost  of  preparing  and  distributing  prospectuses; 
cost  of  soHciting  subscriptions  for  stock;  cash  fees  paid  to  pro- 
moters, and  the  actual  cash  value  (at  the  time  of  the  organiza- 
tion) of  securities  paid  to  promoters  for  their  services  in  organiz- 
ing the  enterprise;  special  counsel  fees;  cost  of  preparing  and 
issuing  certificates  of  stock;  cost  of  procuring  the  necessary 
certificates  from  State  authorities;  and  other  like  costs. 


242  APPENDIX  A 

Note. — Cost  of  soliciting  for  loans  or  for  the  sale  of  bonds  or  other 
evidences  of  indebtedness  shall  be  charged  to  balance-sheet  account 
No.  725,  "Discount  on  funded  debt." 

72.  GENERAL  OFFICERS  AND  CLERKS. 

This  account  shall  include  the  pay  and  expenses  of  executive 
and  general  officers  and  of  general  office  clerks  engaged  exclu- 
sively in  connection  with  the  construction  of  new  road  and 
extensions. 

Note. — The  salaries  and  expenses  of  executive  and  general  officers 
and  of  general  office  clerks  engaged  in  connection  with  the  conduct  of 
commercial  operations  during  the  period  before  the  regular  operation 
of  revenue  trains  shall  be  included  in  account  No.  40,  "Revenues  and 
operating  expenses  during  construction." 

73.  LAW. 

This  account  shall  include  specific  and  distinct  expenditures, 
not  provided  for  elsewhere,  for  law  service  in  connection  with 
the  acquisition  of  new  road,  road  extensions,  additions,  and 
betterments,  such  as  pay  and  expenses  of  counsel,  solicitors,  and 
attorneys,  their  clerks  and  attendants,  and  expenses  of  their 
offices. 

ITEMS   OF   EXPENSE 

(See  general  instructions,  section  13) 

Arbitrators'  services  in  settlement  Legal  reports. 

of  disputed  questions.  Notarial    fees    not    provided    for 

Cost  of  taking  depositions.  elsewhere. 

Cost  of  testimony.  Office  expenses. 

Costs  of  suits.  Printing  of  briefs,  testimony,  etc. 

Court  bonds.  Rent  of  offices. 

Court  expenses.  Special  fees. 

Express  charges.  Telegraph  service. 

Fees  and  retainers  of  attorneys  not  Telephone  service. 

regularly  employed.  Traveling  expenses. 
Law  books.  Witness  fees  not  provided  for  else- 
Legal  forms.  where. 

Note. — Court  costs  and  special  counsel  fees  in  connection  with  the 
acquisition  of  land  for  transportation  operations  shall  be  included  in 
account  No.  2,  "Land  for  transportation  purposes." 

74.  STATIONERY  AND  PRINTING. 

This  account  shall  include  the  cost  of  stationery,  stationery 
supplies,  postage,  office  devices,  and  printed  matter  used  by 
any  class  of  employees  in  connection  with  construction  and  not 
provided  for  elsewhere. 


APPENDIX  A 


243 


ITEMS  OP  STATIONBBT   AND   PBINTINQ 

(See  general  instructions,  section  13) 


Adding  machines. 

Addressographs  and  supplies. 

Arm  rests. 

Binders. 

Blank  books. 

Blotters. 

Blotting  paper. 

Bristol  board. 

Calculating  machines. 

Calendars. 

Carbon  paper. 

Cardboard. 

Cards,  blank  and  printed. 

Circulars. 

Computing  tables. 

Copy  (impression)  books. 

Copying  brushes. 

Copying  presses. 

Crayons. 

Cross-section  books. 

Cross-section  paper. 

Cyclostyles. 

Dating  stamps  and  ribbons. 

Dictaphones. 

Dictographs. 

Drawing  paper. 

Duplicators. 

Electric  pens. 

Envelopes. 

Erasers,  rubber  and  steel. 

Eyelet  punches. 

Eyelets. 

File  boxes. 

Forms,  blank  and  printed. 

Fuel  tickets. 

Glass  pens. 

Hectographs. 

Indexes. 

Ink  for  writing  and  drawing. 

Inkstands. 

Invoice  books. 

Legal  cap  paper. 

Letter  paper. 

Manifold  paper. 

Manifold  pens. 

Mimeographs. 

Mucilage. 

Mucilage  brushes. 

Neostylea. 


Note  paper. 
Notices. 

Numbering  stamps. 
Oil  paper. 
Paper. 

Paper  baskets. 
Paper  clips. 
Paper  cutters. 
Paper  fasteners. 
Paper  files. 
Paper  weights. 
Papyrographs. 
Parchment  paper. 
Pencil  sharpeners. 
Pencils  for  writing  and  drawing. 
Penholders. 
Penracks. 

Pens  for  writing  and  drawing. 
Phonographs  and  records. 
Pins. 
Postage. 

Punches  (not  conductors'  or  bag- 
gagemen's). 
Rubber  bands. 
Rubber  stamps. 
Rulers. 
Ruling  pens. 
Scrapbooks. 
Sealing  wax. 
Seals. 
Shears. 

Shipping  tags. 
Shorthand  notebooks. 
Sponge  cups. 
Sponges. 

Stamps,  impression. 
Stylographs. 

Tablets,  blank  and  printed. 
Tape. 

Telegraph  blanks. 
Time-tables. 

Tissue  (impression)  paper. 
Tracing  cloth. 
Tracing  paper. 
Twine. 

T3T)ewriters  and  ribbons. 
Wage  tables. 
Wastebaskets. 
Water  colors. 


244  APPENDIX  A 

Water  holders.  Wrapping  paper. 

Waybills.  Wringers  for  copying 

Note  A. — The  cost  of  printing  bonds,  etc.,  in  connection  with  the 
carrier's  funded  debt  shall  be  included  in  balance-sheet  account  No.  725, 
"Discount  on  funded  debt." 

Note  B. — The  cost  of  stationery  and  printing,  when  assignable,  shall 
be  included  in  the  cost  of  the  property  in  connection  with  the  acquire- 
ment or  construction  of  which  the  expenditure  occurs. 

75.  TAXES. 

This  ^account  shall  include  State,  county,  township,  city, 
school,  road,  annual  franchise,  and  all  other  taxes  and  assess- 
ments levied  and  paid  on  property  belonging  to  the  carrier  during 
construction  and  before  the  faciUties  are  used  for  commercial 
operations,  except  special  assessments  for  street  and  other  im- 
provements chargeable  to  account  No.  36,  "Paving,"  or  No.  39, 
"Assessments  for  public  improvements." 

Note. — Taxes  during  construction,  when  assignable,  shall  be  included 
in  the  cost  of  the  property  acquired  or  constructed. 

76.  INTEREST  DURING  CONSTRUCTION. 

When  any  bonds,  notes,  or  other  evidences  of  indebtedness 
are  sold,  or  any  interest-bearing  debt  is  incurred  for  acquisition 
and  construction  of  original  road  and  equipment,  extensions, 
additions,  and  betterments,  the  interest  accruing  on  the  part 
of  the  debt  representing  the  cost  of  property  chargeable  to  road 
and  equipment  accounts  (less  interest,  if  any,  allowed  by  de- 
positaries on  unexpended  balances)  after  such  funds  become 
available  for  use  and  before  the  receipt  or  the  completion  or 
coming  into  service  of  the  property  so  acquired  shall  be  charged 
to  this  account. 

When  such  securities  are  sold  at  a  premium  the  proportion  of 
such  premium  assignable  to  the  time  between  the  date  of  the 
actual  issuance  of  the  securities  and  the  time  when  the  property 
acquired  or  the  improvement  made  becomes  available  for  service 
shall  be  credited  to  this  account. 

This  account  shall  also  include  such  proportion  of  the  dis- 
count and  expense  on  funded  debt  issued  for  the  acquisition  of 
original  road,  original  equipment,  road  extensions,  additions, 
and  betterments,  as  is  equitably  assignable  to  the  period  between 
the  date  of  the  actual  issuance  of  securities  and  the  time  when 


APPENDIX  A  245 

the  property  acquired  or  the  improvement  made  becomes  avail- 
able for  the  service  for  which  it  is  intended.  The  proportion  of 
discount  and  expense  thus  chargeable  shall  be  determined  by 
the  ratio  between  the  period  prior  to  the  completion  or  coming 
into  service  of  the  facilities  or  improvements  acquired  and  the 
period  of  the  entire  life  of  the  securities  issued. 

This  account  shall  also  include  reasonable  charges  for  in- 
terest, during  the  construction  period  before  the  property  be- 
comes available  for  service,  on  the  carrier's  own  funds  expended 
for  construction  purposes. 

Note  A. — Interest  on  bonds,  notes,  or  other  evidences  of  indebtedness 
accruing  before  the  proceeds  from  the  sale  of  the  secmities  become  avail- 
able for  use  shall  not  be  included  in  this  account,  nor  shall  there  be  in- 
cluded any  interest  accruing  after  the  property  with  respect  to  which 
the  proceeds  are  expended  is  received  or  becomes  available  for  use  in 
connection  with  commercial  service. 

Note  B. — If  any  securities  which  have  been  issued  or  assumed  by 
the  carrier  are  sold  or  exchanged  by  or  for  the  carrier  for  a  consideration 
the  actual  money  value  of  which  at  the  time  of  such  sale  or  exchange  is 
less  than  the  value  of  the  securities  at  par  and  the  accrued  interest 
thereon,  if  any,  the  difference  between  the  money  value  of  the  considera- 
tion received  and  the  par  value  of  the  securities  plus  the  accrued  interest 
shall  be  deemed  a  discount.  In  no  case  (except  as  provided  in  the  third 
and  fourth  paragraphs  of  this  account)  shall  discounts  be  included  as 
part  of  the  cost  of  anything  charged  to  any  account  prescribed  in  this 
classification. 

Note  C. — For  definition  of  securities  acttially  issued,  see  Note  B, 
under  general  balance-sheet  account  No.  755,  "Funded  debt  unma- 
tured." 

Note  D. — Whenever  interest,  premium,  or  discount  assignable  to 
the  construction  period  is  incurred  in  connection  with  an  expenditure 
covered  by  some  specific  road  and  equipment  account  or  accounts,  such 
interest,  premium,  or  discount  shall  be  charged  directly  to  the  specific 
accounts  to  which  it  is  related. 

77.  OTHER  EXPENDITURES— GENERAL. 

This  account  shall  include  all  expenditures  of  a  special  and 
incidental  nature  in  connection  with  the  acquisition  and  con- 
struction of  original  road  and  equipment,  road  extensions,  addi- 
tions, and  betterments  which  can  not  properly  be  included  in 
any  other  account  in  this  classification. 


APPENDIX  B 

CLASSIFICATION  OF  OPERATING  REVENUES 
AND  OPERATING  EXPENSES.    ISSUE  OF  1914 


GENERAL  INSTRUCTIONS  p 

1.  Operating  accounts 247 

2.  Unaudited  items  affecting  operating  accounts 249 

3.  Delayed  items 249 

4.  Miscellaneous  operations 250 

5.  Submission  of  questions 250 

GENERAL  INSTRUCTIONS 
The  carrier's  records  shall  be  kept  with  sufficient  par- 
ticularity to  show  fully  the  facts  pertaining  to  all  entries 
made  in  the  accounts  provided  herein  for  railway  opera- 
tions. Where  the  full  information  is  not  recorded  in  the 
general  books,  the  entries  therein  shall  be  supported  by 
other  records  in  which  the  full  details  shall  be  shown. 
Such  general  book  entries  shall  contain  sufficient  refer- 
ence to  the  detail  records  to  permit  ready  identification, 
and  the  detail  records  shall  be  filed  in  such  manner  as  to 
be  readily  accessible  for  examination  by  representatives 
of  the  Interstate  Commerce  Commission. 

1.  Operating  Accounts. — ^The  accounts  of  this  classification 
are  designed  to  show  the  revenues  and  expenses  (including  the 
maintenance  of  the  facilities  used)  of  the  carrier's  railway  opera- 
tions, including  rail-line  transportation,  water-line  transporta- 
tion, if  any,  and  services  incident  to  transportation. 

Transportation  includes  the  receipt,  conveyance,  and  delivery 
of  traffic. 

BaiHine  transportation  includes  not  only  the  conveyance  of 

247 


248  APPENDIX  B 

traflBc  over  tracks,  but  also  the  necessary  conveyance  by  water 
transfers  (ferriage,  lighterage,  and  floatage)  either  between 
track  terminals  or  between  track  terminals  and  points  not 
reached  by  tracks,  such  as  the  water  transfers  at  present  oper- 
ated by  carriers  having  track  terminals  at  New  York  harbor, 
and  the  water  transfers  at  present  operated  by  the — 

Ann  Arbor  Railroad  Company  between  Frankfort,  Mich., 
and  Manistee,  Mich.,  Menominee,  Mich.,  Kewaunee,  Wis.,  and 
Manitowoc,  Wis. 

Atchison,  Topeka  &  Santa  Fe  Railway  Company  between 
Ferry  Point,  Cal.,  and  San  Francisco,  Cal. 

Morgan's  Louisiana  &  Texas  Railroad  &  Steamship  Company 
across  the  Mississippi  River  near  New  Orleans,  La. 

Nashville,  Chattanooga  &  St.  Louis  Railway  between  Incline, 
Ala.,  and  Gunters  Landing,  Ala. 

New  York,  Philadelphia  &  Norfolk  Railroad  Company  be- 
tween Cape  Charles,  Va.,  and  Norfolk,  Va. 

Southern  Railway  Company  between  Pinners  Point,  Va.,  and 
Norfolk,  Va. 

Southern  Pacific  Company  between  Oakland,  Cal.,  and  San 
Francisco,  Cal. 

Water-line  transportation  includes  the  transportation  of  local 
traffic  from  port  to  port,  and  the  transportation  of  both  local 
and  inter-line  rail  and  water-line  traffic  from  port  to  port,  such 
as  the  water-line  transportation  operations  at  present  con- 
ducted by  the — 

Baltimore,  Chesapeake  &  Atlantic  Railway  Company  on 
Chesapeake  Bay  and  the  Potomac  River. 

Central  Railroad  Company  of  New  Jersey  between  New 
York,  N.  Y.,  and  Atlantic  Highlands,  N.  J. 

Erie  Railroad  Company  between  Buffalo,  N.  Y.,  and  Mani- 
towoc, Wis.,  Milwaukee,  Wis.,  and  Chicago,  111. 

Southern  Pacific  Company  between  New  York,  N.  Y.,  and 
New  Orleans,  La.;  between  New  York,  N.  Y.,  and  Galveston, 
Tex.;  between  New  Orleans,  La.,  and  Habana,  Cuba;  and  be- 
tween San  Francisco,  Cal,  and  Sacramento,  Cal. 

Incidental  revenues  from  meals,  liquors,  books,  periodicals, 
etc.,  sold  on  vessels,  have,  because  of  established  practice,  been 


APPENDIX  B  249 

provided  for  in  the  primary  accounts  included  in  revenue  gen- 
eral account  II,  Transportation — Water  Line. 

Carriers  are  at  liberty  to  subdivide  the  general  and  primary 
accounts  here  given,  but  if  this  option  be  exercised  a  statement 
of  the  accounts  adopted  shall  be  filed  in  the  office  of  the  Division 
of  Carriers'  Accounts  of  the  Interstate  Commerce  Conunission. 

The  carrier  means  the  accounting  carrier,  except  when  other- 
wise specifically  indicated. 

2.  Unaudited  Items  Affecting  Operating  Accounts. — 
When  for  any  cause  the  amount  of  any  item  affecting  operating 
revenues  or  operating  expenses  can  not  be  accurately  deter- 
mined in  time  for  inclusion  in  the  accounts  of  the  month  in  which 
the  transaction  occurs,  the  amount  of  the  item  shall  be  esti- 
mated and  in  such  form  charged  or  credited  to  operating  ac- 
counts and  credited  to  balance-sheet  account  No.  778,  "Other 
unadjusted  credits,"  or  charged  to  balance-sheet  account  No. 
727,  "Other  unadjusted  debits,"  as  may  be  appropriate,  the 
necessary  adjustments  being  made  later  when  the  item  is  au- 
dited. The  carrier  is  not  required  to  anticipate  minor  items 
which  would  not  appreciably  affect  the  operating  accounts. 

3.  Delayed  Items. — When  no  provision  has  been  made 
through  entries  in  the  accounts  of  these  classifications  for  an- 
ticipating delayed  items  chargeable  or  creditable  to  the  ac- 
counts herein,  and  the  amount  of  any  such  item  is  relatively  so 
large  that  its  inclusion  in  the  accounts  for  a  single  year  would 
seriously  distort  those  accounts,  the  carrier,  if  so  authorized  upon 
application  to  the  Interstate  Commerce  Commission,  shall 
distribute  to  Profit  and  Loss  so  much  of  the  amount  as  may  be 
authorized. 

The  carrier  shall  file  with  the  Commission  for  approval  the 
full  particulars  concerning  each  such  item  and  the  reasons  which, 
in  its  judgment,  indicate  the  propriety  of  such  accounting. 

When  the  amount  of  a  delayed  item  is  relatively  so  large  that 
its  inclusion  in  the  accounts  for  a  single  month  will  seriously  dis- 
tort those  accounts  it  may  be  distributed  in  equal  monthly 
charges  to  the  remaining  months  of  the  current  fiscal  year. 

Delayed  items  are  items  representing  transactions  which  oc- 
curred before  the  current  fiscal  year. 


250  APPENDIX  B 

4.  Miscellaneous  Operations. — The  revenue  and  ex- 
penses of  miscellaneous  operations  involving  the  use  of  such 
facilities  as  hotels  and  restaurants,  power  plants,  cold-storage 
plants,  coal-storage  plants,  cotton-compress  plants,  wood- 
preserving  plants,  ice-supply  plants,  etc.,  shall  not  be  included 
in  the  accounts  of  this  classification  when  the  facilities  used  are 
distinct  from  those  used  by  the  carrier  in  the  service  of  trans- 
portation or  in  the  maintenance  of  facilities  used  in  transporta- 
tion service,  and  the  operations  are  not  incident  to  such  service. 
(See  income  accounts  No.  502,  "Revenues  from  miscellaneous 
operations,"  and  No.  534,  "Expenses  of  miscellaneous  opera- 
tions," and  balance-sheet  account  No.  705,  "Miscellaneous 
physical  property.") 

5.  Submission  of  Questions. — ^To  the  end  that  uniformity 
of  accounting  may  be  maintained  from  year  to  year,  carriers 
shall  submit  all  questions  of  doubtful  interpretation  of  the 
counting  rules  to  the  Commission  for  consideration  and  decision. 

OPERATING  REVENUE  ACCOUNTS 


SPECIAL  INSTRUCTIONS  p^g^ 

1.  Accounts  for  operating  revenues 252 

2.  Interpretation  of  item  lists 253 

GENERAL  ACCOUNTS 

I.  Transportation — Rail  Line 253 

II.  Transportation — Water  Line 260 

III.  Incidental 264 

IV.  Joint  Facility 268 

PRIMARY  ACCOUNTS 

I.  Transportation — Rail  Line — 

101.  Freight 253 

102.  Passenger 255 

103.  Excess  baggage 256 

104.  Sleeping  car 256 

105.  Parlor  and  chair  car 256 


APPENDIX  B  251 

I.  Transportation — Rail  Line — Continued  Page 

106.  Mail 257 

107.  Express 257 

108.  Other  passenger-train 257 

109.  Milk 258 

110.  Switching 258 

111.  Special  service  train 258 

112.  Other  freight-train 259 

113.  Water  transfers— Freight 259 

114.  Water  transfers — Passenger 259 

115.  Water  transfers — Vehicles  and  live  stock.  .....  259 

116.  Water  transfers— Other 260 

II.  Transportation — Water  Line — 

121.  Freight 260 

122.  Passenger 261 

123.  Excess  baggage 262 

124.  Other  passenger  service 262 

125.  Mail 262 

126.  Express 263 

127.  Special  service 263 

128.  Other 263 

III.  Incidental — 

131.  Dming  and  buffet 264 

132.  Hotel  and  restaurant 264 

133.  Station,  train,  and  boat  privileges 265 

134.  Parcel  room 265 

135.  Storage— Freight 265 

136.  Storage— Baggage 265 

137.  Demurrage 265 

138.  Telegraph  and  telephone 265 

139.  Grain  elevator 266 

140.  Stockyard 266 

141.  Power 266 

142.  Rents  of  buildings  and  other  property 267 

143.  Miscellaneous 267 

rV.  Joint  Facility — 

151.  Joint  facility— Cr 268 

152.  Joint  facility— Dr 268 


252  APPENDIX  B 

SPECIAL  INSTRUCTIONS 


1.  Accounts  for  Operating  Revenues. — The  accounts 
provided  for  operating  revenues  are  designed  to  show  amounts 
of  money  which  a  carrier  becomes  entitled  to  receive  from  trans- 
portation and  from  operations  incident  thereto. 

Credits  to  the  revenue  accounts  shall  as  nearly  as  practicable 
be  upon  the  basis  of  accruals  of  revenue. 

No  charge  shall  be  made  against  the  accounts  of  this  classifica- 
tion for  amounts  representing  tariff  charges  which  for  any  cause 
are  uncollected,  the  service  for  which  the  charge  is  made  having 
been  properly  performed  and  individuals  or  companies  being 
liable  for  the  charges. 

Uncollectible  charges  against  individuals  and  companies, 
representing  tariff  charges  for  transportation  service  rendered 
for  which  such  individuals  and  companies  are  liable,  shall  be 
charged  to  income  account  No.  533,  "Uncollectible  railway 
revenues."  This  includes  items  such  as  charges  where  credit 
has  been  extended  and  the  debtor  becomes  insolvent,  and  also 
uncollectible  undercharges  discovered  after  the  service  has  been 
rendered. 

UncoUected  tariff  charges  on  unclaimed  and  refused  ship- 
ments of  freight,  such  refused  shipments  having  been  transported 
in  accordance  with  the  contract  of  shipment,  shall  be  charged 
to  a  suspense  account,  to  which  shall  be  credited,  to  the  extent 
of  the  tariff  charges  included  therein,  the  proceeds  derived  from 
the  sale  of  such  unclaimed  and  refused  freight.  When  the  excess 
of  the  tariff  charges  over  the  amount  realized  from  the  sale  of 
the  freight  is  found  to  be  uncollectible,  it  shall  be  cleared  to 
income  account  No.  533,  "Uncollectible  railway  revenues." 

When  the  amount  realized  from  the  sale  of  such  unclaimed  and 
refused  freight  exceeds  the  amount  of  the  tariff  charges  for  the 
transportation  thereof,  the  excess  (if  lawfully  retained  by  the 
carrier)  shall  be  credited  to  profit  and  loss  account  No.  607, 
"  Miscellaneous  credits." 

The  carrier's  tariff  charges  on  lost,  destroyed,  or  damaged 
shipments,  for  which  charges  neither  consignees  nor  consignors 


APPENDIX  B  US 

are  liable,  shall  be  charged  to  the  revenue  accounts  previously 
credited. 

Overcharges,  when  discovered,  shall  be  credited  to  balance- 
sheet  account  No.  778,  "Other  unadjusted  credits,"  and  when 
found  to  be  unrefundable,  shall  be  cleared  to  profit  and  loss  ac- 
count No.  605,  "Unrefundable  overcharges." 

2.  Interpretation  of  Item  Lists. — Lists  of  items  to  be 
credited  and  of  items  to  be  charged  have  been  given  as  a  part 
of  the  text  of  this  classification  for  the  purpose  of  clearly  indicat- 
ing the  application  of  the  accounting  rules.  They  are  not  to 
be  considered  as  comprising  all  the  items  creditable  or  chargeable 
to  the  several  accounts,  but  merely  as  representative  of  them. 

The  items  contained  in  the  lists  of  items  to  be  charged  to  the 
respective  accounts  are  chargeable  only  when  such  items  have 
been,  through  oversight,  included  in  the  credits  to  the  accounts, 
or  they  are  items  of  revenue  payable  to  others  for  service  to  be 
rendered  in  accordance  with  the  tariff  provisions  applicable  to 
the  rates  upon  which  the  credits  to  the  several  accounts  have 
been  based. 

TEXT  PERTAINING  TO  OPERATING  REVENUE 
ACCOUNTS 

I.  TRANSPORTATION— RAIL  LINE. 

The  primary  accounts  included  in  this  general  account  are 
designed  to  show  amounts  of  money  which  the  carrier  becomes 
entitled  to  receive  or  which  accrue  to  its  benefit  from  service 
rendered  in  transporting  property  or  persons  by  rail  line.  (See 
general  instructions,  section  1.) 

lOL  FREIGHT. 

This  account  shall  include  revenue  from  the  transportation 
of  freight  and  from  transit,  stop,  and  reconsigning  privileges, 
upon  the  basis  of  lawful  tariff  rates. 

ITEMS    TO    BE    CREDITED 

(See  special  instructions,  section  2) 

(a)  Revenue  upon  the  basis  of  local  freight  tariff  rates,  regardless  of 
class  of  train  in  which  the  freight  is  transported. 

(6)  The  carrier's  proportion  of  revenue  upon  the  basis  of  through 


254  APPENDIX  B 

freight  tariff  rates,  regardless  of  class  of  train  on  which  the  freight  is 
transported. 

(c)  Revenue  from  transportation  of  mail  matter,  and  empty  mail 
pouches,  at  freight  tariff  rates. 

(d)  Revenue  from  transportation  of  freight  on  special  trains  at  rates 
based  on  weights  of  shipments. 

(e)  Revenue  on  basis  of  clsssifications  and  freight  tariffs  from  trans- 
portation of  caretakers  of  freight  shipments. 

(/)  Revenue  from  reconsigning  privileges, 
(fif)  Revenue  from  stop  privileges. 
(h)  Revenue  from  transit  privileges. 

(i)  Revenue  upon  the  basis  of  arbitraries  out  of  freight  rates  for  water 
transfers  (ferriage,  lighterage,  and  floatage). 

ITEMS   TO   BE    CHARGED 

(See  special  instructions,  section  2) 

Amounts  paid  as  bridge  and  ferry  arbitraries  on  freight. 

Amounts  paid  for  completing  a  haul. 

Amounts  paid  for  elevation  of  freight. 

Amounts  paid  for  switching  services,  in  connection  with  the  trans- 
portation of  freight,  on  the  basis  of  switching  tariffs,  and  allowances  out 
of  through  rates,  including  amounts  paid  for  switching  empty  cars  in 
connection  with  a  freight  revenue  movement. 

Amounts  paid  for  transferring  freight  between  stations. 

Arbitraries  and  allowances  to  others  for  lighterage  and  wharfage. 

The  carrier's  proportion  of  overcharges  resulting  from  the  use  of  er- 
roneous rates,  weights,  classifications  or  computations. 

The  carrier's  proportion  of  refunds  on  account  of  errors  in  routing  and 
billing. 

The  carrier's  proportion  of  uncollected  revenue  on  freight  lost  or  de- 
stroyed in  transit. 

The  carrier's  proportion  of  uncollected  tariff  charges  on  damaged  ship- 
ments for  which  charges  neither  shipper  nor  consignee  is  liable. 

Note  A. — Amounts  paid  for  switching  empty  cars  otherwise  than  in 
connection  witl?  loaded  movements  shall  be  charged  to  operating  ex- 
pense account  No.  411,  "Other  expenses,"  except  that  amounts  paid 
for  switching  equipment  for  repairs  shall  be  included  in  the  appropriate 
equipment  repair  accounts. 

Note  B. — Other  carriers'  proportion  of  revenue  and  of  uncollectible 
undercharges  paid  by  the  carrier  on  account  of  its  errors  in  routing  and 
billing  shall  be  charged  to  operating  expense  account  No.  411,  "Other 
expenses." 

Note  C — Other  carriers'  proportion  of  revenue  paid  by  the  carrier 
on  freight  lost,  destroyed,  or  damaged  in  transit,  for  which  neither  con- 
signees nor  consignors  are  liable  shall  be  charged  to  operating  expense 
account  No.  418,  "Loss  and  damage — Freight." 

Note  D. — When  a  lessee  company  transports  freight  over  the  tracks 
of  another  carrier  on  the  basis  of  a  proportion  of  revenues  under  a  joint 
arrangement,  it  shall  include  the  entire  compensation  in  its  revenues 
and  statistics,  charging  the  appropriate  joint  facility  expense  and  rental 
accounts  with  the  amounts  paid  the  lessor  company,  and  the  lessor  com- 
pany shall  credit  the  corresponding  accounts. 


APPENDIX  B  255 

Note  E. — The  accrued  revenue  derived  from  the  transportation  of 
cream,  sweet  milk,  etc.,  on  a  basis  of  lawful  tariffs  at  rates  per  package, 
regardless  of  weights,  shall  be  included  in  account  No.  109,  "Milk." 

Note  F. — Revenue  from  the  transportation  of  caretakers  of  freight 
shipments,  when  not  included  as  a  part  of  the  freight  charges  on  the 
waybill  covering  the  freight  shipments,  shall  be  credited  to  account 
No.  102,  "Passenger." 

102.  PASSENGER. 

This  account  shall  include  the  revenue  from  the  transporta- 
tion of  passengers,  based  upon  tariff  fares  for  passengers  so 
transported;  also  from  the  transportation  at  special  fares  of 
excepted  classes  of  passengers  as  provided  by  law. 

ITEMS   TO   BE    CBEDITED 

(See  special  instructions,  section  2) 

(a)  Revenue  upon  the  basis  of  local  tariff  fares. 

(b)  The  carrier's  proportion  of  revenue  upon  the  basis  of  through 
tariff  fares. 

(c)  Revenue  from  extra  fares  on  limited  trains. 

(d)  Revenue  from  additional  fares  for  exclusive  use  of  drawing  rooms 
or  state  rooms. 

(e)  Revenue  from  mileage  and  scrip  coupons  honored. 
if)  Revenue  from  transportation  of  corpses. 

(g)  Revenue  from  transportation  of  passengers  on  special  trains  at 
fares  based  on  late  per  capita. 

(h)  Revenue  upon  the  basis  of  arbitraries  out  of  passenger  fares  for 
water  transfers  (ferriage) . 

ITEMS  TO   BE    CHABQED 

(See  special  instructions,  section  2) 

Amounts  paid  as  bridge  and  ferry  passenger  arbitraries. 

Amounts  paid  for  switching  empty  passenger-train  cars  in  connection 
with  the  transportation  of  passengers  on  the  basis  of  tariff  fares  for  pas- 
sengers so  transported. 

Amounts  paid  for  switching  services  in  completing  a  transportation 
movement. 

Amounts  paid  for  transferring  passengers  or  baggage  between  stations 
or  connecting  lines. 

Redemptions  of  unused  and  partially  unused  local  passenger  tickets. 

Refunds  of  extra  fares  on  limited  trains. 

Refunds  of  local  tariff  fares. 

The  carrier's  proportion  of  redemptions  of  unused  and  partially  un- 
used through  passenger  tickets. 

The  carrier's  proportion  of  refunds  of  through  tariff  fares. 

The  carrier's  proportion  of  overcharges  resulting  from  the  application 
in  error  of  fares  in  excess  of  tariffs. 

Note  A. — Refundable  cash  fare  penalty  collections  made  by  con- 
ductors, and  the  refundable  portions  of  amounts  derived  from  the  sales 


256  APPENDIX  B 

of  mileage  tickets,  mileage  credentials,  and  scrip  shall  not  be  credited 
to  this  account  but  to  an  appropriate  suspense  account. 

Note  B. — This  account  shall  be  credited  with  the  cash  value  of  cou- 
pons from  mileage  tickets  and  scrip  only  as  they  are  honored  for  trans- 
portation. Gross  receipts  from  mileage  tickets  and  scrip  when  sold 
shall  be  credited  to  an  open  account.  The  open  account  shall  be  charged 
and  this  account  credited  with  the  cash  value  of  coupons  as  honored. 

Note  C. — When  a  lessee  company  transports  passengers  over  the 
tracks  of  another  carrier  on  the  basis  of  a  proportion  of  revenues  under  a 
joint  arrangement,  it  shall  include  the  entire  compensation  in  its  revenues 
and  statistics,  charging  the  appropriate  joint  facility  expense  and  rental 
accounts  with  the  amounts  paid  the  lessor  company,  and  the  lessor  com- 
pany shall  credit  the  corresponding  joint  facility  accounts. 

Note  D. — Amounts  paid  for  switching  empty  passenger-train  cars 
otherwise  than  in  connection  with  loaded  movements  shall  be  charged 
to  operating  expense  account  No.  411,  "Other  expenses,"  except  that 
charges  for  switching  equipment  for  repairs  shall  be  included  in  the  ap- 
propriate equipment  repair  accounts. 

103.  EXCESS  BAGGAGE. 

This  account  shall  include  the  revenue  from  the  transporta- 
tion of  baggage  in  excess  of  free  authorized  allowances  on  the 
basis  of  excess  baggage  tariff  rates. 

To  this  account  shall  be  credited  the  cash  value  of  coupons 
from  baggage  scrip  books  only  as  the  coupons  therefrom  are 
honored  for  transportation  of  excess  baggage. 

Note  A. — ^Revenue  derived  from  the  transportation  of  shipments  of 
silk,  fish,  etc.,  in  passenger  trains  at  freight  tariff  rates  shall  be  included 
in  account  No.  101,  "Freight." 

Note  B. — Revenue  derived  from  the  transportation  of  packages,  ar- 
ticles, dogs,  etc.,  on  passenger  trains  on  the  basis  of  passenger  tariff 
rates  shall  he  included  in  account  No.  108,  "Other  passenger-train." 

Note  C. — The  refundable  portions  of  amounts  derived  from  the  sale 
of  baggage  scrip  books  shall  not  be  credited  to  this  account. 

Note  D. — The  gross  receipts  from  baggage  scrip  books  when  sold 
shall  be  credited  to  an  open  account.  The  open  account  shall  be  charged 
and  this  account  credited  with  the  cash  value  of  coupons  as  honored. 

104.  SLEEPING  CAR. 

This  account  shall  include  the  revenue  from  berth  and  seat 
accommodations  furnished  in  sleeping  cars  on  the  basis  of  berth 
or  seat  rates  for  the  space  occupied. 

105.  PARLOR  AND  CHAIR  CAR. 

This  account  shall  include  the  revenue  from  seat  accommoda- 
tions furnished  in  parlor,  observation,  chair,  and  other  special 


APPENDIX  B  257 

passenger  cars  when  operated  in  passenger-train  service  or  in 
special-train  service  at  seat  rates  for  space  occupied. 

106.  MAIL. 

This  account  shall  include  the  revenue  from  the  transporta- 
tion of  mail  at  established  rates  for  specified  routes;  from  the 
use  of  railway  post-office  cars  when  in  carrier's  service  transport- 
ing mails;  from  the  use  of  special  mail  facilities;  and  from  bonuses 
for  special  mail  transportation. 

To  this  account  shall  be  charged  fines  and  penalties  imposed 
by  the  Government  when  not  collected  from  agents  or  employees. 

Note. — The  revenue  from  the  transportation  of  mail  matter  and 
empty  mail  pouches  on  freight  trains  at  freight  tariff  rates  shall  be  in- 
cluded in  account  No.  101,  "Freight." 

107.  EXPRESS. 

This  account  shall  include  the  revenue  from  transportation 
of  express  matter  and  from  use  of  facilities  on  trains  and  at  sta- 
tions incident  to  such  transportation. 

When  a  railway  company  transacts  an  express  business  through 
its  regular  railway  organization,  the  revenue  therefrom  shall 
be  credited  to  this  account. 

Note. — When  contracts  for  express  privileges  provide  specific  amounts 
for  the  rent  of  facilities  at  stations,  such  amounts  shall  be  included  in 
revenue  account  No.  142,  "Rents  of  buildings  and  other  property." 

108.  OTHER  PASSENGER-TRAIN. 

This  account  shall  include  the  revenue  from  transportation 
incident  to  the  operation  of  passenger  trains,  not  provided  for 
otherwise. 

LIST  OP   ITEMS 

(See  special  instructions,  section  2) 

(a)  Revenue  from  transportation  of  packages,  newspapers,  articles 
dogs,  etc.,  on  passenger  trains  at  other  than  freight  or  excess  baggage 
rates. 

(6)  Revenue  received  under  a  guaranteed  lump-sum  minimum  for 
the  transportation  of  passengers  on  regular  or  chartered  trains,  in  excess 
of  regular  tariff  fares  for  the  passengers  actually  transported. 

(c)  The  carrier's  proportion  of  revenue  derived  from  the  operation 
over  its  line  of  sleeping,  parlor,  chair,  observation,  and  other  special 
cars  owned  and  operated  by  other  companies. 

id)  Unclaimed  penalty  collections  on  trains. 


258  APPENDIX  B 

(e)  Value  of  the  portions  of  mileage  tickets,  mileage  coupons,  and  scrip 
books  unpresented  and  unredeemed. 

109.  MILK. 

This  account  shall  include  the  revenue  from  the  transporta- 
tion of  cream,  sweet  milk,  skim  milk,  sour  milk,  buttermilk, 
condensed  milk,  butter  fat,  and  smearcase  or  pot  cheese,  upon 
the  basis  of  lawful  tariffs  at  rates  per  package,  regardless  of 
weights. 

Note. — The  revenue  from  the  transportation  of  milk  upon  the  basis 
of  lawful  tariffs  at  rates  per  specified  weights  shall  be  included  in  revenue 
account  No.  101,  "Freight." 

110.  SWITCHING. 

This  account  shall  include  the  revenue  from  switching  service 
upon  the  basis  of  lawful  tariff  rates. 

To  this  account  shall  be  credited  the  carrier's  revenue  upon 
the  basis  of  tariff  rates,  or  the  carrier's  allowance  out  of  through 
rates,  from  the  switching  of  cars  of  all  kinds,  loaded  or  empty, 
either  locally  at  a  station  or  within  a  switching  district,  between 
connecting  lines,  between  local  industries,  or  between  connect- 
ing lines  and  local  industries;  revenue  upon  the  basis  of  distinct 
tariff  rates  for  "trap-car"  and  "ferry-car"  service  and  for 
spotting  cars;  also  the  revenue  from  interwork  switching  at 
industrial  plants,  and  the  revenue  from  "penalty  switching" 
incident  to  the  improper  delivery  of  cars  by  other  carriers. 

To  this  account  shall  be  charged  amounts  paid  others  for 
switching  when  such  switching  service  is  provided  for  in  the 
switching  rate  charged  by  the  carrier. 

Note. — "Penalty  switching"  charges  paid  by  the  carrier  shall  be  in- 
cluded in  expense  account  No.  411,  "Other  expenses." 

111.  SPECIAL  SERVICE  TRAIN. 

This  account  shall  include  the  revenue  from  running  trains 
either  on  the  basis  of  a  rate  per  mile  or  a  lump-sum  rate  for  the 
train. 

LIST   OF   ITEMS 

(See  special  instructions,  section  2) 

(a)  The  carrier's  revenue  from  handling  baggage  cars  in  special  trains 
for  theatrical  companies. 

(6)  The  carrier's  revenue  from  handling  circus  or  theatrical  company 


APPENDIX  B  259 

trains  on  basis  of  specific  amounts  for  transportation  between  designated 
stations. 

(c)  The  carrier's  revenue  from  running  trains  for  Federal  or  State 
Governments  to  transport  troops,  war  munitions,  camp  outfits,  etc. 

Note  A. — No  account  need  be  kept  of  the  number  of  tons  and  ton- 
miles  or  of  passengers  and  passenger-miles  where  the  revenues  from  a 
train  are  properly  creditable  to  this  account. 

Note  B. — The  revenue  derived  from  the  transportation  of  freight 
and  passengers  on  a  special  train,  upon  the  basis  of  a  rate  per  pound, 
per  hundredweight,  or  per  ton  for  freight,  and  a  rate  per  capita  for 
passengers  shall  be  credited  to  revenue  accounts  No.  101,  "Freight," 
and  No.  102,  "Passenger,"  in  accordance  with  the  charges  for  each 
class  of  transportation  service.  Such  trains  shall  be  classified  as  freight, 
passenger,  or  mixed,  as  may  be  appropriate  under  the  classification  of 
train,  locomotive,  and  car  miles. 

112.  OTHER  FREIGHT-TRAIN. 

This  account  shall  include  the  revenue  from  transportation  in- 
cident to  the  operation  of  freight  trains  not  otherwise  provided  for, 
such  as  revenue  in  excess  of  tariff  rates  for  the  transportation  of 
freight  in  revenue  trains,  with  a  guaranteed  lump  sum  minimum. 

113.  WATER  TRANSFERS— FREIGHT. 

This  account  shall  include  the  revenue  from  the  transfer  of 
freight  by  water  transfers  (ferriage,  lighterage,  and  floatage) 
upon  the  basis  of  lawful  tariff  rates  for  local  service. 

Note. — No  revenue  shall  be  included  in  this  account  upon  the  basis 
of  arbitraries  out  of  rates  for  transportation  involving  rail  line  haul. 

114.  WATER  TRANSFERS— PASSENGER. 

This  account  shall  include  the  revenue  from  the  transfer  of 

passengers  by  water  transfers  (ferriage)  upon  the  basis  of  lawful 

tariff  rates  for  local  service. 

Note. — No  revenue  shall  be  included  in  this  account  upon  the  basis 
of  arbitraries  out  of  rates  for  transportation  involving  rail  line  con- 
veyance. 

115.  WATER      TRANSFERS— VEHICLES     AND      LIVE 
STOCK. 

This  account  shall  include  the  revenue  from  the  transfer  by 
water  transfers  upon  the  basis  of  lawful  local  tariff  rates,  of 
vehicles  of  all  classes;  horses,  cattle,  and  other  animals;  and 
Government  artillery  and  equipment. 

Note. — No  revenue  shall  be  included  in  this  account  upon  the  basis 
of  arbitraries  out  of  rates  for  transportation  involving  rail  line  haul. 


260  APPENDIX  B 

116.  WATER  TRANSFERS— OTHER. 

This  account  shall  include  the  revenue  from  water  transfers 
not  otherwise  provided  for,  such  as  the  revenue  from  towing 
beyond  lighterage  limits  and  all  other  towing  for  which  an  extra 
charge  is  made;  insurance  of  freight  afloat  when  billed  out  at 
other  than  cost;  storage  of  freight  afloat;  grain  overage  in  boats; 
pumping  performed  for  outside  parties;  and  from  other  similar 
sources. 

To  this  account  shall  be  charged  amounts  payable  to  other 
companies  or  individuals  for  extra  lighterage,  extra  towing,  and 
for  all  other  service  when  such  payments  represent  revenue 
collected  and  credited  to  this  account  and  not  a  direct  expense. 

n.  TRANSPORTATION— WATER  LINE. 

The  primary  accounts  included  in  this  general  account  are 
designed  to  show  amounts  of  money  which  the  carrier  becomes 
entitled  to  receive  or  which  accrue  to  its  benefit  from  service 
rendered  in  transporting  property  or  persons  by  water  lines. 
(See  general  instructions,  section  1.) 

121.  FREIGHT. 

This  account  shall  include  the  revenue  from  the  transportation 
of  freight  by  water-line  service  upon  the  basis  of  lawful  tariff 
rates. 

ITEMS   TO   BE   CBEDITED 

(See  special  instructions,  section  2) 

(a)  Revenue  upon  the  basis  of  local  freight  tariff  rates. 
(6)  Carrier's  proportion  of  revenue  upon  the  basis  of  through  tariff 
rates. 

(c)  Revenue  from  the  transportation  of  mail  matter  and  empty  mail 
pouches  at  freight  tariff  rates. 

(d)  Revenue  on  the  basis  of  classifications  and  freight  tariffs  from 
the  transportation  of  caretakers  of  freight  shipments. 

(e)  Arbitraries  allowed  in  rates  for  cargo  insurance. 

ITEMS   TO   BE    CHARGED 

(See  special  instructions,  section  2) 

Amounts  paid  for  completing  a  haul. 
Amounts  paid  for  elevation  of  freight. 

Amounts  paid  for  transferring  freight  between  stations  or  connecting 
lines. 

Arbitraries  and  allowances  to  others  for  lighterage  and  wharfage. 


APPENDIX  B  261 

Carrier's  proportion  of  overcharges  resulting  from  the  use  of  erroneous 
weights,  rates,  classifications,  or  computations. 

Carrier's  proportion  of  refunds  on  account  of  errors  in  routing  or  billing. 

Carrier's  proportion  of  uncollected  revenue  on  freight  lost  or  de- 
stroyed in  transit. 

Carrier's  proportion  of  uncollected  tariff  charges  on  damaged  ship- 
ments for  which  charges  neither  shipper  nor  consignee  is  liable. 

Note  A, — Other  carrier's  proportion  of  revenue  and  of  uncollectible 
undercharges  paid  by  the  carrier  on  account  of  errors  in  routing  and 
billing  shall  be  charged  to  operating  expense  account  No.  432,  "Opera- 
tion of  terminals." 

Note  B. — Other  carriers'  proportion  of  revenue  paid  by  the  carrier 
on  freight  lost  or  destroyed  in  transit  shall  be  charged  to  operating  ex- 
pense account  No.  433,  "Incidental." 

Note  C. — If  the  carrier  maintains  a  transfer  or  lighterage  service 
the  expenses  of  which  are  included  in  expense  account  No.  432,  "Opera- 
tion of  terminals,"  the  revenues  arising  from  the  service  shall  be  included 
in  account  No.  128,  "Other."  If  the  service  is  performed  by  an  outside 
party,  its  cost  to  the  carrier  shall  be  charged  to  the  appropriate  revenue 
account. 

Note  D. — Revenue  from  the  transportation  of  caretakers  of  freight 
shipments,  when  not  included  as  a  part  of  the  freight  charges  on  the 
waybill  covering  the  freight  shipments,  shall  be  credited  to  account 
No.  122,  "Passenger." 

122.  PASSENGER. 

This  account  shall  include  the  revenue  from  the  transporta- 
tion of  passengers  by  water-line  service  based  on  tariff  fares  for 
the  passengers  so  transported;  also  transportation  at  special 
fares  of  excepted  classes  of  passengers  as  provided  by  law. 

The  credits  to  this  account  shall  appear  under  appropriate 
subheads,  as  follows: 

(a)  Revenue  from  the  transportation  of  passengers,  including  sleep- 
ing accommodations  and  meals  (when  not  separable). 

(6)  Revenue  from  the  transportation  of  passengers,  not  including 
sleeping  accommodations  and  meals. 

(c)  Revenue  from  the  rent  of  staterooms,  berths  in  staterooms,  and 
other  sleeping  and  living  accommodations. 

(d)  Revenue  from  the  sale  of  meals  and  food  supplies. 

ITEMS  TO   BE   CBEDITED 

(See  special  instructions,  section  2) 

(a)  Revenue  upon  the  basis  of  local  tariff  fares. 

(6)  The  carrier's  proportion  of  revenue  upon  the  basis  of  through  tarifiP 
fares. 

(c)  Revenue  from  extra  fares  for  limited  service. 

(d)  Revenue  from  mileage  and  scrip  coupons  honored. 

(e)  Revenue  from  the  transportation  of  corpses. 


262  APPENDIX  B 

ITEMS   TO   BE    CHABQED 

(See  special  instructions,  section  2) 

Amounts  paid  for  transferring  passengers  or  baggage  between  stations 
or  connecting  lines. 

Redemptions  of  unused  or  partially  unused  local  passenger  tickets. 

Refunds  of  local  tarifif  fares. 

The  carrier's  proportion  of  redemptions  of  unused  or  partially  unused 
through  passenger  tickets. 

The  carrier's  proportion  of  refunds  of  through  tarifif  fares. 

The  carrier's  proportion  of  overcharges  resulting  from  the  application 
in  error  of  fares  in  excess  of  tariffs. 

Note. — This  account  shall  be  credited  with  the  cash  value  of  coupons 
from  mileage  tickets  and  scrip  only  as  they  are  honored  for  transporta- 
tion. Gross  receipts  from  mileage  tickets  and  scrip,  when  sold,  shall  be 
credited  to  an  open  account.  The  open  account  shall  be  charged  and 
this  account  credited  with  the  cash  value  of  the  coupons  as  honored. 

123.  EXCESS  BAGGAGE. 

This  account  shall  include  the  revenue  from  the  transportation 
by  water-line  service  of  baggage  in  excess  of  free  authorized  al- 
lowance on  the  basis  of  excess  baggage  tariff  rates;  also  the 
revenue  from  the  transportation  of  packages,  articles,  dogs, 
etc.,  incidental  to  the  transportation  of  passengers. 

To  this  account  shall  be  credited  the  cash  value  of  coupons 
from  baggage  scrip  books  only  as  they  are  honored  for  the 
transportation  of  excess  baggage. 

Note  A. — The  refundable  portion  of  amounts  derived  from  the  sale 
of  baggage  scrip  coupons  shall  not  be  credited  to  this  account. 

Note  B. — The  gross  receipts  from  baggage  scrip  books,  when  sold, 
shall  be  credited  to  an  open  account.  The  open  account  shall  be  charged, 
and  this  account  credited  with  the  cash  value  of  coupons  as  honored. 

124.  OTHER  PASSENGER  SERVICE. 

This  account  shall  include  revenue,  not  otherwise  provided 
for,  incident  to  the  transportation  of  passengers. 

ITEMS  TO  BE   CREDITED 

(See  special  instructions,  section  2) 
(a)  Revenue  from  the  sale  of  tobacco,  cigars,  cigarettes,  etc. 
(6)  Revenue  from  the  sale  of  books,  periodicals,  and  other  news-stand 
supplies. 

(c)  Revenue  from  the  rent  of  steamer  chairs  and  rugs. 

125.  MAIL. 

This  account  shall  include  the  revenue  from  the  transporta- 
tion of  mail  by  water-line  service  at  established  rates  for  specified 


APPENDIX  B  ^m 

routes;  from  the  use  of  special  facilities;  and  from  bonuses  for 
special  mail  transportation. 

To  this  account  shall  be  charged  fines  and  penalties  imposed 
by  the  Government  when  not  collected  from  agents  or  em- 
ployees. 

Note. — The  revenue  from  the  transportation  of  mail  matter  and 
empty  mail  pouches  at  freight  tariff  rates  shall  be  included  in  account 
No.  121,  "Freight." 

126.  EXPRESS. 

This  account  shall  include  the  revenue  from  transportation 
of  express  matter  by  water-line  service,  and  from  the  use  of 
facilities  on  vessels  and  at  stations  incident  to  such  transporta- 
tion. 

When  a  carrier  transacts  an  express  business  by  water  line 
through  its  regular  organization,  the  earnings  therefrom  shall 
be  credited  to  this  account. 

Note. — ^When  contracts  for  express  privileges  provide  specific  amounts 
for  the  rent  of  facilities  at  stations,  such  amounts  shall  be  included  in 
revenue  account  No.  142,  "Rents  of  buildings  and  other  property." 

127.  SPECIAL  SERVICE. 

This  account  shall  include  the  revenue-  from  running  vessels 
on  excursions  or  special  trips  when  specific  charges  not  based  on 
the  number  of  passengers  carried  are  made  for  transportation 
between  designated  points;  and  from  running  special  trips  carry- 
ing troops,  munitions  of  war,  camp  outfits,  etc.,  for  the  Federal 
or  State  Governments  when  specific  lump  amounts  are  charged 
for  the  transportation. 

Note. — Lump  sums  received  for  passenger  excursions  or  for  special 
trips  ordinarily  designated  as  "charter  of  vessels,"  shall  be  treated  as 
revenue  incident  to  transportation,  rather  than  as  rent,  and  shall  be 
included  in  this  account. 

128.  OTHER. 

This  account  shall  include  the  revenue  from  transportation 
by  water  line  not  provided  for  elsewhere. 

Note, — Revenues  upon  the  basis  of  distinct  tariff  rates  from  services 
rendered  and  facilities  furnished  on  wharves  and  at  stations  incident  to 
the  operation  of  water-line  service  shall  be  included  in  the  primary  ac- 
counts under  general  account  III,  Incidental. 


264  APPENDIX  B 

m.  INCroENTAL. 

The  primary  accounts  included  in  this  general  account  are 
designed  to  show  the  amounts  which  the  carrier  becomes  en- 
titled to  receive  from  services  rendered  incidentally  with  rail- 
line  and  water-line  transportation,  for  the  use  of  faciUties  of 
which  the  expenses  for  operation  and  maintenance  are  not 
separable  from  railway  expenses,  and  from  incidental  sources 
not  provided  for  elsewhere. 

The  accounts  for  incidental  revenue  shall  be  kept  in  such 
manner  as  to  show  separately,  by  primary  accounts,  the  revenue 
from  services  rendered  and  facilities  furnished  on  wharves  and 
at  stations  incident  to  the  operation  of  water-line  service. 

131.  DINING  AND  BUFFET. 

This  account  shall  include  the  revenue  from  dining  and  buffet 
service  on  trains  and  transfer  boats. 

ITEMS   TO   BE   CREDITED 

(See  special  instructions,  section  2) 

(a)  Revenue  from  lunches  furnished. 

(b)  Revenue  from  meals  furnished. 

(c)  Revenue  from  liquors  furnished. 

(d)  Revenue  from  tobacco  furnished. 

(e)  Revenue  from  cigars  and  cigarettes  furnished. 

Note. — The  revenue  from  dining  and  buffet  service  on  vessels  which 
are  operated  in  water-line  service  is  provided  for  in  the  primary  ac- 
counts included  in  general  account  II,  Transportation — Water  Line. 

132.  HOTEL  AND  RESTAURANT. 

This  account  shall  include  the  revenue  from  hotels,  restaurants, 
and  station  lunch  counters.    (See  general  instructions,  section  4.) 

ITEMS   TO   BE    CREDITED 

(See  special  instructions,  section  2) 
(a)  Revenue    from    the    rent    of       (h)  Revenue    from    tobacco    fur- 
rooms,  nished. 
(h)  Revenue  from  the  use  of  baths.       (i)  Revenue  from  cigars  furnished. 

(c)  Revenue  from  the  use  of  bil-       0)  Revenue  from  cigarettes  fur- 

liard  tables.  nished. 

(d)  Revenue    from    the    use    of       (fc)  Revenue  from  newspapers  fur- 

bowling  alleys.  nished. 

(e)  Revenue    from    lunches    fur-       (I)    Revenue  from  periodicals  fur- 

nished, nished. 

if)  Revenue  from     meals     fur-       (m)  Revenue  from  tonsorial  serv- 

nished.  ice. 

(g)  Revenue  from    liquors    fur-       (n)  Revenue  from  laundry  work. 

nished. 


APPENDIX  B  265 

Note. — This  account  shall  not  include  the  revenues  from  hotels  and 
restaurants  which  are  entirely  distinct  from  the  carrier's  transportation 
plant  and  the  cost  of  which  is  included  in  balance-sheet  account  No.  705, 
"Miscellaneous  physical  property." 

133.  STATION,  TRAIN,  AND  BOAT  PRIVILEGES. 

This  account  shall  include  revenue  from  weighing,  vending, 
and  other  automatic  machines  located  at  stations;  from  adver- 
tising at  stations  and  on  trains  and  on  transfer  boats;  from  the 
privilege  of  operating  news  stands  at  stations  and  selling  papers, 
periodicals,  fruit,  etc.,  on  trains  and  on  transfer  boats;  from 
telephone  companies  for  the  privilege  of  installing  and  operating 
commercial  telephones  at  stations;  from  the  operation  of  eating 
houses  and  dining  and  buffet  service  on  trains  and  transfer 
boats  when  such  operation  is  conducted  by  individuals  or  com- 
panies other  than  railway  companies  and  when  the  expenses 
incurred  by  the  carrier  in  connection  therewith  are  not  separable 
from  its  regular  operating  expenses;  and  from  similar  sources. 

Note. — The  revenue  from  privileges  on  vessels  operated  in  water-line 
service  is  provided  for  in  the  primary  accounts  included  in  general  ac- 
count II,  Transportation — Water  Line. 

134.  PARCEL  ROOM. 

This  account  shall  include  the  revenue  from  the  operation  of 
parcel  rooms. 

135.  STORAGE— FREIGHT. 

This  account  shall  include  the  revenue  from  the  storage  of 
freight. 

136.  STORAGE— BAGGAGE. 

This  account  shall  include  the  revenue  from  the  storage  of 


137.  DEMURRAGE. 

This  account  shall  include  the  revenue  from  the  detention  of 
cars  incident  to  loading,  unloading,  reconsigning,  and  stops  in 
transit  upon  the  basis  of  lawful  tariffs  for  demurrage. 

138.  TELEGRAPH  AND  TELEPHONE. 

This  account  shall  include  the  revenue  from  commercial 
telegraph  and  telephone  operations;  also  amounts  received  from 
telegraph  and  telephone  companies,  whether  as  a  proportion  of 


266  APPENDIX  B 

earnings  or  otherwise,  for  the  privilege  of  transacting  a  commer- 
cial telegraph  or  telephone  business  in  offices  along  the  carrier's 
lines,  when  the  carrier  furnishes  some  service  of  employees 
whose  pay  is  included  in  its  operating  expenses. 

Note. — When  a  telegraph  or  telephone  company  rents  the  telegraph 
or  telephone  line  of  the  carrier  and  pays  all  expenses  incident  to  its  main- 
tenance and  operation,  the  rent  received  shall  be  credited  to  income 
account  No.  510,  "Miscellaneous  rent  income." 

139.  GRAIN  ELEVATOR. 

This  accoimt  shall  include  the  revenue  from  the  operation  of 
grain  elevators.    (See  general  instructions,  section  4.) 

ITEMS   TO   BE    CREDITED 

(See  special  instructions,  section  2) 

(a)  Revenue  from  the  elevation  of  (k)  Revenue  from   loading   grain 

grain.  into    and    unloading    grain 

(&)  Revenue  from  the  storage  of  from  boats  not  covered  by 

grain.  elevation  charges. 

(c)  Revenue  from  bagging  grain.  (0    Revenue  from  trimming  grain 

(d)  Revenue  from  screening  grain.  in  boats  when  performed  by 

(e)  Revenue  from  blowing  grain.  elevator  employees. 

if)  Revenue  from  cooling  grain.  (m)  Revenue  from  the  sale  of 
(g)  Revenue  from  clipping  grain.  screenings  and  sweepings. 

(h)  Revenue  from  cleaning  grain.  (n)  Revenue  from  inspecting  grain 
(i)    Revenue   from   mixing   grain.  in  elevators, 

(i)    Revenue     from     transferring 
grain  in  elevators. 

140.  STOCKYARD. 

This  account  shall  include  the  revenue  from  stockyards.  (See 
general  instructions,  section  4.) 

ITEMS  TO   BE   CREDITED 

(See  special  instructions,  section  2) 

(a)  Revenue  from    feeding    live       (e)  Revenue  from  shearing  sheep. 

stock.  (/)    Revenue  from  dipping  sheep 

(6)  Revenue  from    watering   live                  and  cattle. 

stock.  (g)  Revenue  from  stabling  horses. 

(c)  Revenue  from    bedding    live       (h)  Revenue  from  inspecting  live 

stock.  stock. 

(d)  Revenue  from  otherwise  caring 

for  live  stock. 

141.  POWER. 

This  account  shall  include  the  revenue  from  the  sale  of  electric 
current  and  other  power.    (See  general  instructions,  section  4.) 


APPENDIX  B  267 

142.  RENTS  OF  BUILDINGS  AND  OTHER  PROPERTY. 

This  account  shall  include  the  revenue  from  the  exclusive  use 
of  buildings  and  other  property  or  portions  thereof,  such  as 
depot  and  station  grounds  and  buildings,  general  and  other 
oflfices,  wharves,  ferry  landings,  elevators,  stockyards,  fuel 
yards,  enginehouses,  repair  shops,  and  section  and  other  houses, 
when  the  property  is  operated  and  maintained  in  connection 
with  the  property  used  in  the  carrier's  transportation  operations 
and  the  expenses  of  maintaining  and  operating  the  rented  por- 
tion can  not  be  separated  from  the  expenses  of  that  portion 
used  by  the  carrier.    (See  general  instructions,  section  4.) 

Note. — When  the  expenses  of  maintaining  and  those  of  operating 
property  rented  to  others  are  separable,  the  rents  received  shall  be 
credited  and  the  expenses  of  maintenance  and  operation  shall  be  charged 
to  appropriate  income  accounts. 

143.  MISCELLANEOUS. 

This  account  shall  include  the  revenue  from  railway  operations 
not  provided  for  elsewhere.    (See  general  instructions,  section  4.) 

LIST   OF   ITEMS 

(See  special  instructions,  section  2) 

(a)  Amounts  received  for  privilege  of  cutting  hay  along  the  right  of  way. 

(6)  Commissions  received  for  collecting  premiums  on  insurance  policies 
from  employees  and  installment  payments  for  books,  watches,  etc.,  sold 
by  dealers  to  employees. 

(r)  Profit  from  jobbing  and  installing  electric  power  lines  for  others. 

{d)  Revenue  from  boat  demurrage. 

(e)  Revenue  from  freight  and  passenger  privileges  over  a  carrier's 
wharves  and  docks. 

(/)  Revenue  from  garnishee  fees. 

(g)  Revenue  from  operation  of  coal  and  ore  wharves,  cold-storage 
plants,  coal-storage  plants,  cotton-compress  plants,  and  wood-preserving 
plants.    (See  general  instructions,  section  4.) 

(h)  Revenue  from  privilege  of  mooring  and  anchoring  boats  at  wharves 
and  docks. 

(i)  Revenue  from  sale  of  cinders  produced  by  carrier. 

(j)  Revenue  from  use  of  carrier's  bridges  by  pedestrians,  street  car 
lines,  vehicles,  etc. 

(fc)  Revenue  from  temporary  use  of  carrier's  tracks  for  detouring 
trains,  etc. 

(I)  Revenue  from  use  of  tracks  incident  to  delays  in  loading  or  re- 
moving freight. 

(m)  Revenue  from  water  furnished  boats  from  water  stations  operated 
by  the  carrier. 

(n)  Revejjue  from,  weighing  cars. 


268  APPENDIX  B 

(o)  The  carrier's  proportion  of  gross  revenue  from  operation  of  clergy 
bureaus. 

(p)  The  carrier's  proportion  of  gross  revenue  from  operation  of  ticket 
validation  agencies. 

((/)   Unclaimed  deposits  for  prepaid  transportation. 

Note. — When  a  bridge  of  one  carrier  is  jointly  used  by  itself  and 
another  carrier  and  such  use  is  paid  for  on  the  basis  of  fiat  rent  or  charge 
per  train-mile  or  toll  per  passenger,  per  ton,  or  per  car,  the  compensa- 
tion therefor  shall  be  credited  to  the  appropriate  joint  facility,  operating 
expense,  and  income  accounts. 

IV.  JOINT  FACILITY. 

151.  JOINT  FACILITY— CR. 

Tliis  account  shall  include  the  carrier's  proportion  of  revenue 
collected  by  others  in  connection  with  the  operation  of  joint 
tracks,  yards,  terminals,  and  other  facilities. 

Note  A. — The  purpose  of  this  account  is  to  show  the  amounts  of 
revenue  from  the  operation  of  joint  tracks,  yards,  terminals,  and  other 
facilities  operated  by  other  companies,  which  under  existing  contracts 
or  agreements  are  credited  by  the  operating  company  to  the  tenant 
companies  which  participate  therein.  The  bill  rendered  by  any  creditor 
company  against  a  debtor  company  for  the  latter's  proportion  of  the 
expense  of  maintenance  and  operation  of  joint  facilities,  which  includes 
also  a  credit  covering  a  proportion  of  the  revenue  to  be  paid  over,  shall 
show  the  distribution  of  the  credit  for  such  proportion  of  the  revenue 
separately  from  the  distribution  of  the  expense  of  operation. 

Note  B. — No  credits  shall  be  made  to  this  account  representing 
amounts  creditable  by  the  operating  company  to  primary  accounts 
Nos.  101  to  109,  111  to  116,  121  to  128,  131,  132,  139  to  141. 

152.  JOINT  FACILITY— DR. 

This  account  shall  include  that  proportion  of  revenue  from 
the  operation  of  joint  tracks,  yards,  terminals,  and  other  facili- 
ties, which  is  creditable  to  other  companies. 

Note  A. — The  purpose  of  this  account  is  to  show  the  amount  of 
revenue  from  operation  of  a  terminal  company  or  other  carrier  which, 
under  the  terms  of  existing  contracts  or  agreements  covering  the  joint 
use  of  tracks,  yaids,  and  other  facilities,  is  credited  to  other  carriers  that 
participate  in  the  benefits  from  such  joint  use.  The  bill  rendered  by  a 
creditor  company  against  a  debtor  company  for  the  latter's  proportion 
of  expense  of  maintaining  and  operating  joint  facilities,  which  includes 
a  credit  covering  the  debtor  company's  proportion  of  the  revenues  from 
operation  of  such  joint  facilities,  shall  indicate  separately  the  proper 
distribution  of  both  the  revenues  and  the  expenses  included  in  the  bill, 
and  such  distribution  shall  be  adhered  to  by  the  debtor. 

Note  B. — No  debits  shall  be  made  to  this  account  representing 
amounts  creditable  by  the  operating  company  to  primary  accounts 
Nos.  101  to  109.  Ill  to  116,  121  to  128,  131,  132,  139  to  141. 


APPENDIX  B  26d 

OPERATING  EXPENSE  ACCOUNTS 

SPECIAL  INSTRUCTIONS 

Page 

1.  Accounts  for  operating  expenses 275 

2.  Maintenance  expenses 276 

3.  Cost  of  repairs 277 

4.  Royalties  on  appliances 278 

5.  Fixed  improvements  retired  and  replaced 278 

6.  Distribution  of  charges  for  property  retired  and  replaced  279 

7.  Charges  to  operating  expenses  for  fixed  improvements 

converted 279 

8.  Depreciation  of  fixed  improvements 279 

9.  Joint  facility  accounts 280 

10.  Clearing  accounts 280 

11.  Gravel  and  sand  pits  and  quarries 280 

12.  Power  plant  operations 282 

13.  Power  substation  operations 283 

14.  Maintaining  transmission  and  distribution  systems ....  283 

15.  Shop  expenses 283 

16.  Material  store  expenses 286 

17.  Stationery  store  expenses , 287 

18.  Insurance 287 

19.  Equalization  of  expenses 287 

20.  Balances  in  operating  reserves 288 

21.  Subprimary  accounts  for  water  lines  and  electric  divi- 

sions   288 

22.  Interpretation  of  item  lists 289 

GENERAL  ACCOUNTS 

I.  Maintenance  of  Way  and  Structures 289 

II.  Maintenance  of  Equipment 320 

III.  Traffic 341 

IV.  Transportation — Rail  Line 347 

V.  Transportation — ^Water  Line 383 

VI.  Miscellaneous  Operations 387 

VII.  General 392 

VIII.  Transportation  for  Investment — Cr 398 


270  APPENDIX  B 


PRIMARY  ACCOUNTS 


I.  Maintenance  of  Way  and  Structures —  Page 

201.  Superintendence 289 

202.  Roadway  maintenance 291 

203.  Roadway — Depreciation 293 

204.  Underground  power  tubes 293 

205.  Underground  power  tubes — Depreciation ....  293 

206.  Tunnels  and  subways 293 

207.  Tunnels  and  subways — Depreciation 294 

208.  Bridges,  trestles,  and  culverts 294 

209.  Bridges,  trestles,  and  culverts — Depreciation  295 

210.  Elevated  structures 295 

211.  Elevated  structures — Depreciation 295 

212.  Ties 295 

213.  Ties— Depreciation 295 

214.  Rails 295 

215.  Rails— Depreciation 296 

216.  Other  track  material 296 

217.  Other  track  material — Depreciation 297 

218.  Ballast 297 

219.  Ballast— Depreciation 297 

220.  Track  laying  and  surfacing 298 

221.  Right-of-way  fences 298 

222.  Right-of-way  fences — Depreciation 299 

223.  Snow  and  sand  fences  and  snowsheds 299 

224.  Snow  and  sand  fences  and  snowsheds — De- 

preciation    299 

225.  Crossings  and  signs 299 

226.  Crossings  and  signs — Depreciation 300 

227.  Station  and  office  buildings 300 

228.  Station  and  office  buildings — Depreciation . . .  301 

229.  Roadway  buildings 302 

230.  Roadway  buildings — Depreciation 302 

231.  Water  stations 302 

232.  Water  stations — ^Depreciation 303 

233.  Fuel  stations 303 


APPENDIX  B  ^71 

Maintenance,  Etc. — Continued  Page 

234.  Fuel  stations — Depreciation 304 

235.  Shops  and  enginehouses 304 

236.  Shops  and  enginehouses — Depreciation 305 

237.  Grain  elevators 305 

238.  Grain  elevators — Depreciation 305 

239.  Storage  warehouses 305 

240.  Storage  warehouses — Depreciation 306 

241.  Wharves  and  docks 306 

242.  Wharves  and  docks — Depreciation 306 

243.  Coal  and  ore  wharves 306 

244.  Coal  and  ore  wharves — Depreciation 307 

245.  Gas  producing  plants 307 

246.  Gas  producing  plants — Depreciation 307 

247.  Telegraph  and  telephone  lines 307 

248.  Telegraph  and  telephone  lines — Depreciation  308 

249.  Signals  and  interlockers 308 

250.  Signals  and  interlockers — Depreciation 309 

251.  Power  plant  dams,  canals,  and  pipe  lines.  .  . .  309 

252.  Power  plant  dams,  canals,  and  pipe  lines — De- 

preciation    310 

253.  Power  plant  buildings 310 

254.  Power  plant  buildings — Depreciation 310 

255.  Power  substation  buildings 310 

256.  Power  substation  buildings — Depreciation. . .  311 

257.  Power  transmission  systems 311 

258.  Power  transmission  systems — Depreciation..  311 

259.  Power  distribution  systems 312 

260.  Power  distribution  systems— Depreciation . . .  312 

261.  Power  line  poles  and  fixtures 312 

262.  Power  line  poles  and  fixtures — Depreciation. .  313 

263.  Underground  conduits 313 

264.  Underground  conduits — Depreciation 313 

265.  Miscellaneous  structures 313 

266.  Miscellaneous  structures— Depreciation 313 

267.  Paving 314 

268.  Paving — Depreciation 314 

269.  Roadway  machines 314 


272  APPENDIX  B 

I.  Maintenance,  Etc. — Continued  Page 

270.  Roadway  machines — Depreciation 314 

271.  Small  tools  and  supplies 315 

272.  Removing  snow,  ice,  and  sand 316 

273.  Assessments  for  public  improvements 316 

274.  Injuries  to  persons 317 

275.  Insurance 318 

276.  Stationery  and  printing 318 

277.  Other  expenses 319 

278.  Maintaining  joint  tracks,  yards,  and  other 

facilities— Dr 319 

279.  Maintaining  joint  tracks,  yards,  and  other 

facilities— Cr 320 

II.  Maintenance  of  Equipment — 

301.  Superintendence 320 

302.  Shop  machinery 322 

303.  Shop  machinery — Depreciation 323 

304.  Power  plant  machinery 323 

305.  Power  plant  machinery — Depreciation 324 

306.  Power  substation  apparatus 324 

307.  Power  substation  apparatus — Depreciation .  .  324 

308.  Steam  locomotives — Repairs 324 

309.  Steam  locomotives — Depreciation 325 

310.  Steam  locomotives — Retirements 326 

311.  Other  locomotives — Repairs 326 

312.  Other  locomotives — Depreciation 326 

313.  Other  locomotives — Retirements 327 

314.  Freight-train  cars — Repairs 327 

315.  Freight-train  cars — Depreciation 328 

316.  Freight-train  cars — Retirements 329 

317.  Passenger-train  cars — Repairs 329 

318.  Passenger-train  cars — Depreciation 330 

319.  Passenger-train  cars — Retirements 331 

320.  Motor  equipment  of  cars — Repairs 331 

321.  Motor  equipment  of  cars — Depreciation 332 

322.  Motor  equipment  of  cars — Retirements 332 

323.  Floating  equipment — Repairs 332 

324.  Floating  equipment — Depreciation 334 


APPENDIX  B  273 

II.  Maintenance  of  Equipment — Continued  Page 

325.  Floating  equipment — Retirements 334 

326.  Work  equipment — Repairs 335 

327.  Work  equipment — Depreciation 337 

328.  Work  equipment — Retirements 337 

329.  Miscellaneous  equipment — Repairs 337 

330.  Miscellaneous  equipment — Depreciation ....  338 

331.  Miscellaneous  equipment — Retirements 338 

332.  Injuries  to  persons 338 

333.  Insurance 339 

334.  Stationery  and  printing 339 

335.  Other  expenses 340 

336.  Maintaining  joint  equipment  at  terminals — 

Dr 341 

337.  Maintaining  joint  equipment  at  terminals — 

Cr 341 

III.  Traffic — 

351.  Superintendence 342 

352.  Outside  agencies 343 

353.  Advertising 343 

354.  Traffic  associations 344 

355.  Fast  freight  lines 344 

356.  Industrial  and  immigration  bureaus 344 

357.  Insurance 345 

358.  Stationery  and  printing 345 

359.  Other  expenses 346 

IV.  Transportation — Rail  Line — 

371.  Superintendence 347 

372.  Dispatching  trains 348 

373.  Station  employees 348 

374.  Weighing,  inspection,  and  demurrage  bureaus  350 

375.  Coal  and  ore  wharves 350 

376.  Station  supplies  and  expenses 350 

377.  Yardmasters  and  yard  clerks 353 

378.  Yard  conductors  and  brakemen 353 

379.  Yard  switch  and  signal  tenders 353 

380.  Yard  enginemen 354 

381.  Yard  motormen 354 


274  APPENDIX  B 

IV.  Transportation — Rail — Line — Continued  Page 

382.  Fuel  for  yard  locomotives 354 

383.  Yard  switching  power  produced 355 

384.  Yard  switching  power  purchased 356 

385.  Water  for  yard  locomotives 356 

386.  Lubricants  for  yard  locomotives 357 

387.  Other  supplies  for  yard  locomotives 357 

388.  Enginehouse  expenses — ^Yard 359 

389.  Yard  supplies  and  expenses 360 

390.  Operating  joint  yards  and  terminals — Dr 360 

391.  Operating  joint  yards  and  terminals — Cr.  .  . .  361 

392.  Train  enginemen 361 

393.  Train  motonnen 361 

394.  Fuel  for  train  locomotives 361 

395.  Train  power  produced 362 

396.  Train  power  purchased 363 

397.  Water  for  train  locomotives 363 

398.  Lubricants  for  train  locomotives 364 

399.  Other  supplies  for  train  locomotives 364 

400.  Enginehouse  expenses — ^Train 365 

401.  Trainmen 366 

402.  Train  supplies  and  expenses 366 

403.  Operating  sleeping  cars 370 

404.  Signal  and  interlocker  operation 371 

405.  Crossing  protection 371 

406.  Drawbridge  operation 371 

407.  Telegraph  and  telephone  operation 372 

408.  Operating  floating  equipment 373 

409.  Express  service 375 

410.  Stationery  and  printing 375 

411.  Other  expenses 376 

412.  Operating  joint  tracks  and  facilities — Dr.  .  .  .  377 

413.  Operating  joint  tracks  and  facilities — Cr.  .  .  .  377 

414.  Insurance 378 

415.  Clearing  wrecks 378 

416.  Damage  to  property 379 

417.  Damage  to  live  stock  on  right  of  way 280 

418.  Loss  and  damage — Freight 380 


APPENDIX  B  275 

rV.  Teansportation — Rail  Line — Continued  Page 

419.  Loss  and  damage — Baggage 381 

420.  Injuries  to  persons 382 

V.  Transportation — Water  Line. 

431.  Operation  of  vessels 383 

432.  Operation  of  terminals 384 

433.  Incidental 386 

VI.  Miscellaneous  Operations. 

441.  Dining  and  buffet  service 388 

442.  Hotels  and  restaurants 388 

443.  Grain  elevators 389 

444.  Stockyards 390 

445.  Producing  power  sold 391 

446.  Other  miscellaneous  operations 391 

VII.  General — 

451.  Salaries  and  expenses  of  general  officers 392 

452.  Salaries  and  expenses  of  clerks  and  attendants  393 

453.  General  office  supplies  and  expenses 394 

454.  Law  expenses 394 

455.  Insurance 395 

456.  Relief  department  expenses 396 

457.  Pensions 396 

458.  Stationery  and  printing 396 

459.  Valuation  expenses 397 

460.  Other  expenses 397 

461.  General  joint  facilities — Dr 398 

462.  General  joint  facilities — Cr 398 

VIII.  Transportation  for  Investment — Cr 398 

SPECIAL  INSTRUCTIONS 


1.  Accounts  for  Operating  Expenses. — ^The  accounts  pre- 
scribed for  operating  expenses  are  designed  to  show  expenses  of 
furnishing  transportation  service,  including  the  expenses  of 
maintaining  the  plant  used  in  the  service.  The  accounting  shall 
be  as  nearly  as  practicable  upon  the  basis  of  accruals;  however, 
the  option  is  allowed  the  carrier  of  omitting  charges  to  the  ac- 


276  APPENDIX  B 

counts  provided  for  the  depreciation  of  fixed  improvements 
and  of  including  the  depreciation  (ledger  value  less  salvage) 
of  such  property  in  the  appropriate  repair  accounts  at  the  time 
the  property  is  converted  or  retired  for  replacement. 

Fixed  improvements  means  structures  wliich  are  fixed  as  to 
location,  such  as  tunnels,  bridges,  buildings,  earthworks,  etc. 

2.  Maintenance  Expenses. — ^The  accounts  provided  for 
maintenance  of  fixed  improvements  and  of  equipment  are  de- 
signed to  show  the  cost  of  repairs  and  also  the  loss  through  de- 
preciation of  the  property  used  in  operations,  including  all  such 
expenses  resulting  from  ordinary  wear  and  tear  of  service,  ex- 
posure to  the  elements,  inadequacy,  obsolescence,  or  other  de- 
preciation, or  from  accident,  fire,  flood,  or  other  casualty. 

The  cost  of  repairs  which  has  been  provided  for  in  the 
several  repair  accounts  shall  include  the  cost  of  inspect- 
ing to  determine  the  repairs  necessary,  and  of  adjusting, 
repairing,  or  replacing  parts,  both  of  fixed  improvements 
and  of  equipment,  such  as  the  repairing  of  locomotives, 
cars,  frogs  and  switches,  or  the  replacing  of  ties,  rails,  etc.,  in 
tracks;  the  cost  of  inspecting  and  testing  after  repairs  have 
been  made,  such  as  the  testing  of  locomotives  after  repairs  to 
determine  that  the  repairs  have  been  properly  made,  and  the 
running  of  repaired  locomotives  light  in  order  to  break  them 
in  for  regular  service;  incidental  costs  of  repairs,  such  as  the 
construction  or  removal  of  false  work;  cost  of  relocation  of  fixed 
improvements;  cost  of  demolishing  retired  fixed  improvements 
(except  those  retired  and  not  replaced)  and  disposing  of  the 
wreckage  therefrom  when  the  property  is  demolished  by  or  for 
the  account  of  the  carrier;  cost  of  protecting  service  during  the 
progress  of  addition  and  betterment  work;  cost  of  laying  out, 
cleaning,  grading,  draining,  fencing,  mowing,  and  beautifying 
grounds  pertaining  to  buildings;  repairing  sidewalks,  driveways, 
and  streets  within  or  adjacent  to  such  grounds;  cost  of  remov- 
ing snow  from  the  roofs  of  buildings  (when  not  removed  by 
those  employed  in  the  buildings) ;  cost  of  the  periodical  restora- 
tion of  seasonal  features,  such  as  gardens,  shrubbery,  and  lawns; 
cost  of  operating  hothouses  in  connection  with  the  work  of 
beautifying  grounds;  cost  of  restoring  sidewalks,  driveways, 


APPENDIX  B  277 

lawns,  etc.,  in  grounds  after  addition  and  betterment  work  (see 
general  instructions  for  the  classification  of  investment  in  road 
and  equipment,  section  12);  and  cost  of  clearing  and  removing 
casual  incumbrances,  such  as  ice,  snow,  and  fallen  timber. 

The  difference  between  the  depreciation  upon  fixed  improve- 
ments retired  and  replaced  and  the  amount  provided  for  through 
the  depreciation  accounts,  shall  be  included  in  the  repair  ac- 
counts when  the  property  is  retired.  Similar  adjustments  on 
account  of  equipment  retired  shall  be  included  in  the  accounts 
for  equipment  retirements.  (See  classification  of  investment 
in  road  and  equipment,  general  account  II,  Equipment.) 

Distinct  maintenance  accounts  have  been  provided  for  ex- 
penses of  a  general  character,  such  as  superintendence,  stationery 
and  printing,  and  injuries  to  persons,  which,  on  account  of  es- 
tablished practice,  it  is  deemed  advisable  to  segregate. 

3.  Cost  of  Repairs. — It  is  intended  that  the  repair  accounts 
of  this  classification  shall  include  the  cost  of  labor,  materials 
and  supplies,  work-train  service,  floating  equipment  work  serv- 
ice, special  machine  service,  contract  work,  privileges,  protec- 
tion from  casualties,  and  other  analogous  items  of  expense  in 
connection  with  the  maintenance  of  the  plant  used  in  railway 
service.  The  several  items  of  cost  here  referred  to  are  defined 
as  follows: 

(a)  Cost  of  labor  includes  amounts  paid  for  the  labor  of  the 
carrier's  own  employees.  Except  where  otherwise  specified  in 
the  text  of  the  accounts,  the  cost  of  boarding,  traveling,  and 
other  incidental  expenses  of  employees  shall  be  included  in 
the  accounts  to  which  the  pay  of  the  employees  is  charge- 
able. 

(6)  Cost  of  materials  and  supplies  includes  the  cost  of  materials 
and  supplies,  including  small  tools,  at  the  point  of  free  delivery, 
plus  freight  charges  of  foreign  lines,  and  the  costs  of  inspection 
and  loading  assumed  by  the  carrier;  also  a  proportion  of  store 
expenses  (see  section  16).  It  should  not,  however,  include  ex- 
penses of  transportation  over  the  carrier's  line.  In  calculating 
the  cost  of  materials  used  proper  allowance  shall  be  made  for 
the  value  of  unused  portions  and  of  cuttings,  turnings,  borings, 
etc.,  and  for  the  value  of  the  material  recovered  from  property 


278  APPENDIX  B 

repaired  and  from  temporary  tracks,  scaffolding,  cofferdams, 
and  other  temporary  structures  used  in  repair  work. 

(c)  Cost  of  work-train  service  includes  cost  of  labor  of  engine- 
men,  trainmen,  and  enginehouse  men,  including  the  wages  of 
engine  crews  and  train  crews  held  in  readiness  for  such  service; 
and  the  cost  of  fuel  and  other  supplies  consumed  in  connection 
with  the  operation  of  work  trains. 

(d)  Cost  of  floating  equipment  work  service  includes  cost  of 
labor  of  crews,  including  wages  of  crews  held  in  readiness  for 
service;  and  the  cost  of  fuel  and  other  supplies  consumed  in  con- 
nection with  the  operation  of  floating  equipment  work  service. 

(e)  Cost  of  special  machine  service  includes  the  cost  of  labor 
expended  and  of  materials  and  supplies  consumed  in  operating 
steam  shovels,  scrapers,  rail  unloaders,  ballast  unloaders,  pile 
drivers,  dredges,  ditchers,  weed  burners,  and  other  labor-saving 
machines;  also  rents  paid  for  use  of  such  machines. 

(/)  Cost  of  contract  work  includes  amounts  paid  for  work  per- 
formed imder  contract  by  other  companies,  firms,  or  individuals 
and  specific  expenses  incident  to  the  award  of  the  contract. 

(g)  Cost  of  privileges  includes  amounts  paid  for  special  privi- 
leges, such  as  the  temporary  use  of  public  property  or  streets, 
in  connection  with  the  repairs  of  the  property  of  the  carrier. 
(Periodical  payments  for  such  privileges  in  connection  with 
permanent  use  of  public  property  for  railway  operations  shall 
be  included  in  the  income  accounts.) 

(h)  Cost  of  protection  from  casualties  includes  expenditures 
for  protection  against  damage  by  fire,  flood,  etc.,  such  as  pay- 
ments for  discovery  or  extinguishment  of  fires,  cost  of  detecting 
and  prosecuting  incendiaries,  expense  for  witnesses  in  relation 
thereto,  amounts  paid  to  municipal  corporations  and  others  for 
fire  protection,  and  other  analogous  items  of  expense  in  connec- 
tion with  repair  work,  but  does  not  include  insurance  premiums 
paid  to  assure  reimbursement  for  prospective  losses. 

4.  Royalties  on  Appliances. — The  royalties  for  patent 
rights  on  mechanical  appliances  used  in  repairs  of  equipment 
shall  be  included  in  the  cost  of  the  repairs. 

5.  Fixed  Improvements  Retired  and  Replaced. — The 
ledger  value  (less  salvage  and  the  credit  balance  in  the  accrued 


i 


APPENDIX  B  279 

depreciation  account  with  respect  to  the  property  retired)  of 
fixed  improvements  retired  and  replaced  with  property  of  like 
purpose,  together  with  the  cost  of  removing  the  property  retired, 
shall  be  included  in  the  accounts  appropriate  for  the  repairs  of 
the  property  before  retirement.  (See  section  7  of  general  in- 
structions for  the  classification  of  investment  in  road  and  equip- 
ment.) 

6.  Distribution  of  Charges  for  Property  Retired  and 
Replaced. — In  case  the  amount  chargeable  as  operating  ex- 
penses for  property  retired  and  replaced,  as  provided  for  in 
section  7  of  the  general  instructions  for  the  classification  of  in- 
vestment in  road  and  equipment,  is  relatively  large  and  its  in- 
clusion would  seriously  distort  the  expense  accounts  for  a  single 
year,  the  carrier,  if  so  authorized  by  the  Commission,  may 
charge  the  amount  thereof  to  balance-sheet  account  No.  726, 
"Property  abandoned  chargeable  to  operating  expenses,"  and 
distribute  it  thereafter,  in  accordance  with  the  provisions  of 
that  account  to  the  operating  expenses  of  succeeding  years. 

If  so  authorized  by  the  Commission,  the  carrier  may  charge 
to  Profit  and  Loss  any  extraordinarily  large  item  representing 
the  cost  of  property  retired  and  replaced,  instead  of  charging 
such  item  to  Operating  Expenses.  The  carrier  shall  file  with  the 
Commission  a  statement  of  the  cost  and  a  description  of  the 
property  retired  and  the  reasons  which,  in  its  judgment,  indicate 
the  propriety  of  charging  the  cost  of  such  property  to  Profit 
and  Loss. 

7.  Charges  to  Operating  Expenses  for  Fixed  Improve- 
ments Converted. — In  connection  with  the  conversion  of 
fixed  improvements,  the  ledger  value  of  property  before  con- 
version, plus  the  cost  of  conversion,  less  the  sum  of  the  estimated 
value  of  the  property  as  converted,  the  amount  included  in  the 
accrued  depreciation  account  with  respect  to  the  property  thus 
converted,  and  the  salvage  recovered,  shall  be  charged  to  the 
accounts  of  this  classification  appropriate  for  repairs  of  the 
property  before  conversion.  (See  general  instructions  for  the 
classification  of  investment  in  road  and  equipment,  section  11.) 

8.  Depreciation  of  Fixed  Improvements. — Depreciation 
accounts,  in  which  to  include  uniform  monthly  charges  to  cover 


280  APPENDIX  B 

the  depreciation  of  fixed  improvements,  have  been  provided  for 
the  purpose  of  creating  reserves  which  will  meet  or  reduce  the 
amounts  otherwise  chargeable,  as  may  be  appropriate,  to  operat- 
ing expense  or  to  profit  and  loss  accounts  to  cover  property 
retired.  Such  depreciation  charges  shall  be  based  in  each  in- 
stance upon  the  percentage  of  the  original  cost  (estimated  if  not 
known),  ledger  value,  or  purchase  price  of  the  property  deter- 
mined to  be  equitable  by  the  carrier's  experience  and  best  sources 
of  information  as  to  the  actual  current  loss  from  depreciation. 
A  statement  of  the  bases  used  by  the  carrier  for  computing  these 
charges  shall  be  included  in  its  annual  report  to  the  Commission. 
Until  further  directed  the  use  of  depreciation  accounts  for  fixed 
improvements  is  optional  with  the  carrier.  (See  balance-sheet 
account  No.  775,  "Accrued  depreciation. — Road.") 

9.  Joint  Facility  Accounts. — ^Accounts  thus  designated 
have  been  provided  for  the  joint  users  of  tracks,  bridges,  yards, 
wharves,  stations,  and  other  facilities  to  indicate  the  proper  ac- 
counting for  settlements  which  cover  income  and  operating  ex- 
penses in  connection  with  the  use  of  such  facilities,  and  for 
settlements  covering  cost  of  yard  service.  When  the  compensa- 
tion for  the  use  of  facilities  is  a  fixed  amount  or  is  based  upon  a 
charge  per  passenger,  ton,  car,  or  other  unit,  it  shall  be  fairly 
apportioned  by  the  operating  company  among  the  joint  faciUty 
operating  expense  and  income  accounts.  The  creditor  shall 
show  the  distribution  of  these  charges  upon  its  bills,  and  such 
distribution  shall  be  adhered  to  by  the  debtor. 

Train  service  in  connection  with  the  line  haul  of  traffic  is  not 
considered  a  joint  facility  operation,  and  the  settlements  be- 
tween carriers  covering  items  chargeable  to  accounts  Nos.  392 
to  403  shall  not  be  included  in  the  joint  facility  accounts. 

10.  Clearing  Accounts. — In  recognition  of  the  fact  that 
certain  expenditures  incident  to  the  construction  and  the  opera- 
tion of  property  are  not  chargeable  directly  to  any  particular 
property  investment  or  expense  account,  clearing  accounts  have 
been  provided  for  the  purpose  of  securing  an  equitable  distribu- 
tion of  such  items  to  the  proper  primary  accounts.  (See  sec- 
tions 11  to  17,  inclusive.) 

11.  Gravel  and  Sand  Pits  and  Quarries. — When  a  gravel 


APPENDIX  B  281 

or  sand  pit  or  quarry  is  opened  for  operations  likely  to  extend 
over  a  long  period,  an  account  shall  be  set  up  designated  "Opera- 
tions of  gravel  pit  at  ,"  or  "Operations  of  quarry  at 

,"  as  the  case  may  be.    To  this  account  shall  be  charged — 

(a)  That  part  of  the  cost  of  the  land  in  excess  of  its  estimated 
value  after  the  gravel,  sand,  or  stone  has  been  removed,  the 
amount  thus  charged  being  concurrently  credited  to  the  prop- 
erty account  m  which  the  cost  of  the  land  is  included. 

(b)  Amoimts  paid  for  the  right  to  enter  upon  and  remove 
ballast  from  land  not  owned  by  the  carrier. 

(c)  The  cost  of  sinking  test  holes. 

(d)  The  expenses  for  clearing,  stripping,  draining,  and  ditch- 
ing the  land,  and  of  moving  and  changing  fences  and  buildings 
preparatory  to  opening  the  pit  or  quarry. 

(e)  The  cost,  in  excess  of  the  estimated  salvage  value,  of  rails 
and  fastenings  used  in  constructing  tracks  to  and  in  the  gravel 
pit  or  quarry,  the  estimated  salvage  being  carried  in  an  appro- 
priate suspense  account. 

(/)  The  cost,  in  excess  of  the  estimated  salvage  value,  of 
ties  and  other  material,  and  of  labor  expended  on  such  tracks. 

{g)  The  cost  of  labor  and  train  service  employed  in  producing, 
quarrying,  and  loading  ballast,  including  the  cost  of  operation, 
repairs,  and  depreciation  of  stationary  engines,  steam  shovels, 
stone  crushers,  and  other  similar  machinery,  and  the  pay  and 
expenses  of  watchmen. 

(h)  The  cost  of  explosives  and  hand  tools,  and  miscellaneous 
expenses. 

(i)  The  cost  of  installing,  operating,  and  maintaining  signals 
and  interlockers  at  gravel  pits. 

Credit  to  these  accounts  shall  be  made  each  month  to  cover 
the  cost  of  ballast  material  produced  during  the  month.  The 
cost  of  production  shall  include  the  expenses  directly  assignable 
to  the  monthly  output,  plus  a  proportion  of  the  expenses  not 
directly  assignable,  such  as  cost  of  land,  tracks,  machinery,  and 
interlockers.  This  latter  amount  shall  be  computed  upon  the 
basis  of  the  ratio  which  the  monthly  output  bears  to  the  total 
estimated  yardage  to  be  taken  from  the  pit. 

When  any  portion  of  the  product  of  such  pits  or  quarries  is 


£82  APPENDIX  B 

sold,  the  cost  thereof  shall  be  credited  to  this  clearing  account, 
and  the  profit  thereon,  if  any,  shall  be  credited  to  revenue  ac- 
count No.  143,  "Miscellaneous." 

12.  Power  Plant  Operations. — The  accounting  for  the  ex- 
penses of  maintaining  and  operating  an  electric,  steam,  or  other 
power  plant  (both  building  and  machinery)  shall  be  determined 
by  the  purpose  for  which  the  power  produced  is  used. 

When  the  power  plant  is  intended  and  used  for  producing 
power  solely  for  the  carrier's  own  operations  and  the  cost  of 
operating  the  plant  is  chargeable  to  clearing  account  "Shop 
expenses,"  or  to  any  one  specific  account  for  operating  expenses 
the  expenses  of  maintenance  shall  be  charged  to  the  appropriate 
maintenance  accounts,  and  the  cost  of  operation  to  the  account 
appropriate  according  to  the  use  of  the  power. 

When  the  power  from  such  a  plant  is  properly  chargeable  to 
more  than  one  account,  the  expenses  of  maintaining  and  operat- 
ing the  plant  shall  be  included  in  clearing  accoimt  "Power  plant 
operations."  The  expense  of  maintenance  shall  be  cleared  from 
that  account  to  the  appropriate  maintenaDce  accounts  for  operat- 
ing expenses.  The  expenses  of  operation  shall  be  apportioned 
to  the  appropriate  accounts  upon  the  basis  of  quantity  of  power 
used  for  the  various  purposes. 

When  a  part  of  the  power  produced  by  a  power  plant  is  sold 
and  the  remainder  is  used  in  the  carrier's  own  operations,  the 
cost  of  maintaining  and  operating  the  plant  shall  be  charged  to 
a  clearing  account.  The  expense  of  maintenance  shall  be  cleared 
from  that  account  to  the  appropriate  maintenance  account  in 
operating  expenses.  The  proportion  of  the  expenses  of  operation 
assignable  to  the  power  sold,  on  the  basis  of  ratio  of  quantity 
of  power  sold  to  total  quantity  of  power  produced,  shall  be 
credited  to  this  clearing  account  and  charged  to  account  No.  445, 
"Producing  power  sold."  The  remainder  of  the  cost  of  operation 
shall  be  distributed  to  the  appropriate  expense  accounts  for  the 
carrier's  own  operations,  in  the  manner  indicated  in  the  preced- 
ing paragraphs. 

When  power  plants  are  intended  and  used  solely  for  furnish- 
ing power  to  others,  the  investment  therein  shall  be  included  in 
balance  sheet  account  No.  705,  "Miscellaneous  physical  prop- 


APPENDIX  B  283 

erty,"  and  the  operation  shall  not  be  included  in  the  accounts 
of  this  classification.  (See  general  instructions,  section  4,  and 
income  account  No.  534,  "Expenses  of  miscellaneous  opera- 
tions.") 

13.  Power  Substation  Operations. — The  plan  outlined 
for  the  expenses  of  operating  power  plants  shall  be  followed  in 
accounting  for  the  operations  of  substations. 

14.  Maintaining  Transmission  and  Distribution  Systems. 
— The  accounting  for  the  maintenance  of  transmission  systems 
and  distribution  systems  shall  be  in  accordance  with  instruc- 
tions pertaining  to  power  plant  operations. 

15.  Shop  Expenses. — ^A  clearing  account  entitled  "Shop  ex- 
penses" shall  be  kept,  to  which  shall  be  charged  items  of  expense 
at  shops,  enginehouses,  repair  tracks,  and  other  places  at  which 
mechanical  work  is  done,  not  assignable  directly  to  specific  ac- 
counts. Such  expenses  shall  be  apportioned  among  the  various 
accounts  affected.  The  basis  of  distribution  shall  be  the  relative 
proportion  which  the  total  amount  of  charges  to  "  Shop  expenses  " 
bears  to  the  total  of  the  directly  distributed  labor.  To  avoid 
monthly  fluctuations  in  the  ratio  of  shop  expenses  to  the  total 
of  distributed  labor,  carriers  are  permitted  to  make  the  monthly 
apportionment  on  the  basis  of  a  percentage  of  the  distributed 
labor,  provided  the  shop  expense  account  be  adjusted  and  closed 
out  at  the  end  of  each  year.  The  expenses  assignable  to  this 
account  are  as  follows: 

(a)  General  shop  employees. — The  pay  of  general  foremen  in 
small  shops,  who  exercise  direct  supervision  over  all  departments 
unassisted  by  department  foremen;  the  pay  of  department  fore- 
men, assistant  department  foremen,  other  supervising  or  direct- 
ing employees,  and  their  clerks;  pay  of  chauffeurs  and  oilers; 
pay  of  sweepers,  cleaners,  roustabouts,  and  other  unskilled  la- 
borers employed  in  general  work  in  and  about  shops  and  shop 
grounds;  pay  of  watchmen,  gatekeepers,  and  policemen  at  shops, 
repair  tracks,  and  other  places  at  which  mechanical  work  is 
done;  pay  of  employees  while  attending  fires  or  fire  drills;  and 
pay  of  employees  while  making,  repairing,  or  having  charge  of 
small  shop  tools. 

(6)  Power, — The  cost  of  fuel  used  in  steam  and  other  power 


284  APPENDIX  B 

plants  in  producing  power  for  shops  and  for  other  places  at  which 
mechanical  work  is  done;  cost  of  oil,  grease,  waste,  and  other 
material  used  in  the  operation  of  such  power  plants;  pay  of 
stationary  engineers,  firemen,  electricians,  coal  handlers,  and 
other  employees  engaged  in  production  of  power;  cost  of  carbon 
brushes,  fuses,  lamps,  picks,  pokers,  scuttles,  shovels,  and  other 
small  tools  and  supplies;  and  cost  of  water  and  power  purchased. 
(See  section  12.) 

(c)  Heating. — ^The  cost  of  fuel  and  other  supplies  used  for 
heating  shops  and  other  places  at  which  mechanical  work  is 
done,  shop  ofiices,  watchmen's  and  gatekeepers'  boxes,  and  in- 
spectors' shanties;  and  the  pay  of  firemen,  coal  handlers,  and 
other  employees  engaged  in  operating  heating  boilers.  (See 
section  12.) 

(d)  Lighting. — The  cost  of  electric  current,  gas,  oil,  torches, 
lamp  burners,  lamp  chimneys,  lamps  not  permanently  attached 
to  buildings,  incandescent  lamps  and  carbons,  and  other  ma- 
terial used  in  lighting  shops  and  shop  offices,  repair  tracks,  and 
other  places  at  which  mechanical  work  is  done,  and  cost  of  ma- 
terial used  and  labor  expended  in  operating  electric-light  plants 
and  repairing  electric-light  and  other  lamps  at  shops.  (See 
section  12.) 

(e)  Switching  locomotives. — All  expenses,  including  wages, 
fuel,  and  supplies,  of  operating  switching  locomotives  when 
exclusively  assigned  to  switching  service  at  shops.  (The  ex- 
penses of  incidental  switching  at  shops  by  locomotives  in  trans- 
portation switching  service  shall  be  charged  to  appropriate 
transportation  accounts.) 

(/)  Shop  supplies. — Fuel  for  forge  and  other  shop  work; 
supplies  and  small  tools  used  by  mechanics  on  miscellaneous 
work  and  not  durable;  test-room  and  laboratory  supplies  used 
in  connection  with  shop  work;  lubricating  material  for  shop 
machinery  and  tools;  water  used  at  shops  and  shop  offices, 
repair  tracks,  and  other  places  at  which  mechanical  work  is 
done;  and  other  supplies  used  generally  in  shop  work. 


APPENDIX  B 


285 


LIST   OF  SUPPLIES  AND    SMALL  TOOLS 


Acid. 
Adzes. 
Ammonia. 
Auger  bits. 
Augers. 
Axes. 
Basins. 
Bath  brick. 
Battery  brushes. 
Beeswax. 
Bell  cord. 
Bluestone. 
Bone,  granulated. 
Borax. 
Bottles. 

Braces  and  bits. 
Brooms. 
Brushes,  dust. 
Brushes,  file. 
Brushes,  oil. 
Brushes,  paint. 
Brushes,  scrub. 
Brushes,  sweeping. 
Brushes,  varnish. 
Brushes,  wall. 
Brushes,  whitewash. 
Brushes,  window. 
Buckets. 

Carpenter  tools  furnished  appren- 
tices. 
Casehardening  compound. 
Cement,  belt. 
Chalk. 
Chalk  lines. 
Chamois  skins. 
Charcoal. 
Chisels. 
Clamps,  hand. 
Coal  picks. 

Compound  for  B.  S.  hammers. 
Compound  for  grinding. 
Compound  for  hydraulic  jacks. 
Compound  for  welding. 
Corks. 

Cosmic  to  prevent  rust. 
Crayon. 
Cups,  tin. 
Cushion  beaters. 
Dippers. 
Disinfectants. 


Ditching  lines. 

Drill  bits. 

Drinking  cups. 

Drinking  glasses. 

Dustpans. 

Emery. 

Emery  boxes. 

Emery  cloth. 

Emery  paper. 

Faucets. 

File  cards. 

Files. 

Fire  hooks  for  stationary  boilers. 

Fire  shovels  for  stationary  boilers. 

Flags. 

Flannel,  canton. 

Forks. 

Forks,  coke. 

Funnels. 

Gimlets. 

Glue. 

Gluepots. 

Glycerin. 

Graphite. 

Grindstones. 

Ground  glass. 

Hack-saw  blades. 

Hammers. 

Hammers,  babbitt. 

Hand  leathers. 

Handles  for  tools. 

Hatchets. 

Hoes. 

Keel. 

Lampblack. 

Lead. 

Lye. 

Mallets. 

Marking  brushes. 

Marking  pots. 

Measures,  liquid. 

Mineral  paste. 

Mop  handles. 

Mops. 

Muslin. 

Nippers. 

Oil  cans. 

Oilstones. 

Padlocks. 

Paint  pots. 


286 

APPENDIX  B 

Picks. 

Solder. 

Pipe- joint  grease. 

Soldering  fluid. 

PUers. 

Spelter  solder. 

Plumbago. 

Spigots  for  oil  barrels. 

PoUsh. 

Spirit-level  vials. 

Polish,  stove. 

Spirit  levels. 

Potash. 

Sponges. 

Prisms. 

Sprinkling  cans. 

Rakes. 

Squares. 

Rasps. 

Squirts  (lubricating). 

Ratchet  braces. 

Stencil  brushes. 

Red  lead. 

Tacks. 

Resin. 

Tape  lines. 

Rope. 

Tapes,  metallic. 

Rules. 

Tool  steel  for  small  hand  tools. 

Sal  ammoniac. 

TripoU. 

Sand  soap. 

Trucks. 

Sandpaper. 

Twine. 

Saw  blades. 

Washbasins. 

Saws,  hand. 

Wheelbarrows. 

Scoops. 

Whetstones. 

Screw  drivers. 

White  lead. 

Screws. 

Whiting. 

Shellac. 

Window  cloths. 

Shovels. 

Wire. 

Slate  pencils. 

Wire  brushes. 

Slates. 

Wrenches. 

Sledges. 

Zinc  cakes. 

Soap. 

Zincs. 

Soda. 

(g)  Incidental  expenses. — Watchmen's  uniforms,  clocks,  and 
call  boxes;  traveling  expenses  connected  with  the  operation  of 
shops  and  not  directly  chargeable  to  other  accounts;  removal 
of  snow  and  ice  from  transfer  tables  and  shop  yards;  cleaning 
of  privy  vaults;  horse  keep;  cost  of  ice  for  shops;  and  other  un- 
distributed shop  expenses. 

16.  Material  Store  Expenses. — To  a  clearing  account 
called  "Material  store  expenses"  shall  be  charged  expenses  in 
connection  with  purchasing,  handling,  and  storing  material  in 
and  distributing  it  from  the  company's  storehouses,  including 
the  pay  of  officers  and  employees  in  the  purchasing  and  store 
departments  and  their  traveling,  office,  and  other  expenses;  also 
all  expenses,  including  wages,  fuel,  and  supplies,  of  operating 
switching  locomotives  when  exclusively  assigned  to  the  service 
of  switching  at  material  storehouses.     (Expenses  of  incidental 


APPENDIX  B  287 

switching  at  material  yards  by  locomotives  in  regular  switching 
service  shall  be  charged  to  the  appropriate  transportation  ac- 
counts.) The  pay  and  expenses  of  men  employed  in  purchasing 
or  inspecting  a  single  class  of  material,  such  as  ties,  shall  be 
added  as  store  expenses  to  the  cost  of  that  particular  material. 

The  total  amount  of  storehouse  expense  charged  to  this  ac- 
count shall  be  so  distributed  among  the  accounts  to  which  ma- 
terial has  been  charged  that  the  amounts  thus  distributed  will 
be,  for  each  account,  in  proportion  to  the  value  of  the  material 
issued  chargeable  thereto,  except  that  the  amount  representing 
the  purchasing  department  expenses  shall  be  apportioned  on 
the  value  of  the  material  issued  Which  was  purchased  by  that 
department.  To  avoid  monthly  fluctuations  in  the  ratio  of 
store  expenses  to  the  value  of  material  purchased  or  issued, 
carriers  may  make  a  monthly  apportionment  on  the  basis  of 
fair  percentage  rates,  provided  the  store  expense  account  be 
adjusted  and  closed  out  at  the  end  of  each  year. 

17.  Stationery  Store  Expenses. — ^A  clearing  account  en- 
titled "Stationery  store  expenses"  shall  be  kept,  to  which  shall 
be  charged  expenses  in  connection  with  purchasing,  handling, 
and  storing  stationery,  and  for  distributing  it  from  the  stationery 
stores,  including  the  pay  of  officers  and  employees  in  the  sta- 
tionery store  department  and  their  traveling,  office,  and  other 
expenses.  The  amounts  charged  to  this  account  shall  be  ap- 
portioned to  the  accounts  to  which  is  charged  stationery  issued 
from  the  store,  upon  the  basis  of  the  charges  to  these  accounts 
for  such  stationery.  To  avoid  monthly  fluctuations  in  the  ratio 
of  store  expenses  to  the  value  of  material  issued  or  purchased 
carriers  may  make  a  monthly  apportionment  on  the  basis  of 
fair  percentage  rates,  provided  the  stationery  store  expense 
account  be  adjusted  and  closed  out  at  the  end  of  each  year. 

18.  Insurance. — Provision  has  been  made  in  each  of  the 
general  accounts  for  premiums  paid  and  amounts  set  aside  for 
fire  and  other  insurance.  Amounts  of  insurance  recovered  on 
account  of  losses  shall  be  credited  to  the  accounts  to  which  the 
losses  are  chargeable. 

19.  Equalization  of  Expenses. — For  the  purpose  of  equaliz- 
ing the  monthly  charges  for  the  repairs  of  fixed  improvements 


288  APPENDIX  B 

and  equipment  the  carrier  may  include  each  month  in  the  ap- 
propriate primary  repair  accounts  a  uniform  proportion  of  the 
amount  of  authorized  estimates  of  such  expenses  for  the  fiscal 
or  calendar  year.  In  a  like  manner,  the  authorized  estimates 
of  expenses  on  account  of  personal  injury  or  loss  and  damage 
Hability,  for  stationery  and  printing,  and  for  advertising  may 
be  equalized  in  the  monthly  accounts  for  the  fiscal  or  calendar 
\Tar.  If  the  carrier  has  been  unable  to  carry  out  its  program 
for  repairs  and  does  not  adjust  its  accounts  to  conform  to  the 
actual  expenditures,  it  may  carry  forward  the  balances  and 
treat  them  as  provided  in  section  20,  relating  to  balances  in 
operating  reserves.  If,  on  account  of  claims  for  personal  injury 
or  loss  and  damage  being  unsettled  at  the  close  of  the  year,  the 
accounts  for  such  expenses  are  not  adjusted,  the  balances  carried 
forward  in  the  operating  reserve  account  shall  be  analyzed  as 
also  provided  for  in  section  20  of  these  instructions. 

Charges  for  stationery  and  printing,  and  for  advertising,  for 
a  fiscal  or  calendar  year  shall  be  adjusted  to  the  actual  expenses. 

20.  Balances  in  Operating  Reserves. — If,  at  the  end  of  a 
fiscal  year,  balances  remain  in  operating  reserves,  the  carrier 
shall  indicate  in  detail  in  a  formal  report  to  the  Commission  the 
amounts  therein,  and  the  conditions  causing  the  carrying  for- 
ward of  such  balances,  except  as  to  balances  applicable  to  per- 
sonal injury  or  loss  and  damage  liability,  for  which  balances 
the  carrier  shall  preserve  in  its  files  the  details  upon  which  such 
estimates  were  based.  Separate  records  shall  be  kept  of  the 
operating  reserve  accounts  for  each  year. 

21.  SuBPRiMARY  Accounts  for  Water  Lines  and  Electric 
Divisions. — When  a  carrier  operates  a  water  line  and  desires 
to  set  up  subprimary  accounts  under  the  primary  accounts  for 
such  operations  contained  in  this  classification,  the  subprimary 
accounts  shall  conform  to  the  accounts  prescribed  in  the  classi- 
fication of  operating  expenses  of  carriers  by  water.  When  the 
carrier  operates  an  electric  di\'ision  and  desires  to  set  up  sub- 
primary  accounts  under  the  primary  accounts  contained  in  this 
classification,  the  subprimary  accounts  shall  conform  to  the 
accounts  prescribed  in  the  classification  of  operating  expenses 
of  electric  railways. 


APPENDIX  B  289 

22.  Interpretation  of  Item  Lists. — Lists  of  "items,"  "de- 
tails," etc.,  have  been  given  as  a  part  of  this  classification  for 
the  purpose  of  clearly  indicating  the  application  of  the  account- 
ing rules  in  specific  cases.  The  lists  in  every  case  are  to  be  con- 
sidered as  merely  representative  and  not  as  excluding  from  any 
account  analogous  items  which  happen  to  be  omitted  from  the 
list  appended.  On  the  other  hand,  the  appearance  of  an  item 
in  a  list  warrants  the  inclusion  of  such  item  in  the  account  con- 
cerned only  when  the  text  of  the  account  also  indicates  inclusion, 
inasmuch  as  the  same  item  frequently  appears  in  more  than 
one  list — for  example,  the  item  of  blank  books  under  accounts 
Nos.  276,  334,  358,  410,  and  458— and  the  proper  charge  in 
any  one  instance  must  be  determined  by  the  text  of  the  account. 


TEXT  PERTAINING  TO  OPERATING  EXPENSE 
ACCOUNTS 


1.  MAINTENANCE  OF  WAY  AND  STRUCTURES. 

The  primary  accounts  included  in  this  general  account  are 
designed  to  show  the  expenses  of  maintaining  fixed  improve- 
ments which  are  devoted  to  railway  operations,  with  the  excep- 
tion of  shop  machinery,  power  plant  machinery,  and  power 
substation  apparatus,  the  expenses  of  maintaining  which  are 
includible  in  general  account  II,  Maintenance  of  Equipment. 

The  accounts  for  maintenance  of  way  and  structures  shall  be 
kept  in  such  manner  as  to  show  separately,  by  primary  accounts, 
the  expenses  directly  assignable  to  sleeping-car  operations, 
water-line  operations,  dining  and  buffet  service,  hotels  and 
restaurants,  grain  elevators,  stockyards,  producing  power  sold, 
and  other  miscellaneous  operations. 

201.  SUPERINTENDENCE. 

This  account  shall  include: 

Pay  of  Officers. — The  pay  of  officers  directly  in  charge  of 
or  engaged  in  the  maintenance  of  roadway  and  structures. 


290 


APPENDIX  B 


LIST   OF   OFFICERS 


Vice  president. 

Assistant  vice  president. 

General  manager. 

Assistant  general  manager. 

General  superintendent. 

Assistant  general  superintendent. 

Chief  engineer. 

Engineer. 

Division  engineer. 

Bridge  engineer. 

Chief  signal  engineer. 

Assistant  engineers. 

Architect. 

Roadmaster. 

Assistant  roadmaster. 


(See  special  instructions,  section  22) 
Master  carpenter. 


Assistant  master  carpenter. 
Master  mason. 

Superintendent  of  roadway  struc- 
tures. 
Superintendent  of  scales. 
Inspector  of  maintenance. 
Building  inspector. 
Inspector  of  roadway  stores. 
Supervisor. 
Assistant  supervisor. 
Fire  chief. 
Fire  inspector. 
Sanitary  inspector. 


Pay  of  Clerks  and  Attendants. — ^The  pay  of  clerks  and 
other  employees  in  the  offices  and  on  the  business  cars  of  officers 
whose  pay  is  chargeable  to  this  account. 


Chief  clerk. 

Draftsmen. 

Clerks. 

Stenographers. 

Transitmen. 

Levelmen. 

Rodmen. 


LIST   OF  EMPLOYEES 

(See  special  instructions,  section  22) 
Chainmen. 
Axmen. 
Janitors. 
Messengers. 
Cooks. 
Porters. 


Office  and  Other  Expenses. — Office  expenses  and  other 
expenses  of  officers  and  employees  whose  pay  is  chargeable  to 
this  account;  also  amounts  paid  detective  agencies  and  others 
for  investigations  in  connection  with  maintenance  of  way  and 
structures. 

ITEMS   OP   EXPENSE   AND    SUPPLIES 

(See  special  instructions,  section  22) 


Atlases  and  maps. 

Books  for  office  use. 

Business  car  service. 

Fees  and  dues  in  associations. 

Furniture  repairs  and  renewals. 

Heating. 

Lighting. 

Official  train  service. 

Periodicals  and  newspapers. 


Power. 

Provisions  for  business  cars. 

Rent  of  offices. 

Repairs  of  rented  offices. 

Telegraph  service. 

Telephone  service. 

Traveling  expenses. 

Water  and  ice. 


APPENDIX  B 


291 


SUPPLIES   FOR   TECHNICAL  ASSISTANTS 

(See  special  instructions,  section  22) 


Barometers. 
iBook8  and  maps. 
Boxes   for  materials   and   instru- 
ments. 
Cameras. 
Camp  equipage. 
Chains  for  surveyors. 
Compasses. 
Curves. 

Drafting  boards. 
Drafting  instruments. 
Field  glasses. 
Field  notebooks. 
Hatchets. 
Levels. 
Magnets. 
Magnifiers. 
Marking  chalk. 
Oilstones. 
Paper,  blue-print. 
Parallel  rules. 
Photographic  supplies. 
Plane  tables. 
Planimeters. 


Plummets. 

Protractors. 

Ranging  poles. 

Reading  glasses. 

Rod  for  surveyors. 

Scales. 

Section  liners. 

Sextants. 

Slide  rules. 

Stakes. 

Straightedges. 

Tally  registers. 

Tape  lines. 

Tee-squares. 

Telescopes. 

Thermometers. 

Thumb  tacks. 

Tracing  linens. 

Transits. 

Traverse  tables. 

Triangles. 

Tripods. 

Verniers. 


Note  A. — When  employees  designated  above  are  engaged  on  con- 
struction or  other  work  not  chargeable  to  Maintenance  of  Way  and 
Structures,  their  pay  and  expenses  while  thus  employed  shall  be  charged 
to  the  specific  work  on  which  engaged. 

Note  B. — When  oflBcers  designated  above  have  supervision  over 
more  than  one  department,  their  salaries,  the  pay  of  their  clerks  and  at- 
tendants, and  their  oflBce  and  other  expenses  shall  be  apportioned  equally 
among  the  departments  over  which  they  have  supervision. 

Note  C. — No  part  of  the  pay  and  expenses  of  the  officers  and  em- 
ployees designated  above  shall  be  charged  to  other  primary  accounts 
under  Maintenance  of  Way  and  Structures. 

Note  D. — The  cost  of  stationery  for  maintenance  of  way  and  struc- 
tures offices  is  chargeable  to  account  No.  276,  "Stationery  and  printing." 


202.  ROADWAY  MAINTENANCE. 
This  account  shall  include: 
Care  op  Roadbed. — The  cost  of  repairing  roadbed. 


292  APPENDIX  B 

ITEMS   OF   ROADWAY   EXPENSE 

(See  special  instructions,  section  22) 

Blasting  rocks.  Oiling  roadbed. 

Building  temporary  tracks  around  Removing  temporary  tracks  around 

slides  and  washouts.  slides  and  washouts 

Constructing     and     cleaning    tile  Repairing    roadbed    damaged    by 

ditches,  open  ditches  and  drains.  washouts. 

Crowning  track  ties  with  retaining  Removing  dangerous  rocks. 

earth.  Removing  slides. 

Filling  borrow  and  cattle  pits.  Restoring  roadbed,  cuts,  fills,  and 

Keeping  tracks  clear  and  repairing  embankments       to        standard 

subgrade  in  case  of  washouts.  width. 

Landscape  gardening  along  road-  Sloping  cuts. 

way.  Sodding  roadway. 

Note  A. — The  cost  of  drains  or  sewers  laid  under  tracks  shall  be  in- 
cluded in  account  No.  208,  "Bridges,  trestles,  and  culverts."  The  cost 
of  landscape  gardening  within  the  limits  of  the  grounds  around  buildings 
shall  be  included  in  the  appropriate  repair  accounts  for  buildings. 

General  Cleaning. — The  cost  of  cutting,  removing,  and 
disposing  of  brush,  grass,  and  weeds  from  the  right  of  way; 
plowing  and  digging  fireguards;  dressing  ballast  and  cutting  sod 
lines;  removing  miscellaneous  scrap,  drift,  cinders,  dirt,  and 
other  material  from  right  of  way  and  from  road  and  terminal 
tracks  (including  tracks  at  stations,  engine  yards,  and  car  yards) ; 
and  cleaning  streets  used  as  roadways. 

Note  B. — Loading  ashes  at  engine-j'ard  tracks  shall  be  charged  to 
the  enginehouse  expense  accounts. 

Watching  Roadway. — The  cost  of  extinguishing  fires  on 
right  of  way  and  adjacent  thereto,  and  of  walking,  watching, 
and  patrolling  tracks  and  right  of  way. 

Note  C. — The  cost  of  watching  and  patrolling  bridges,  buildings,  and 
miscellaneous  property  is  provided  for  in  accounts  specifically  relating 
to  such  property. 

Bank  Protection. — Cost  of  protecting  banks  by  repairing 
retaining  walls,  riprap,  piling,  piers,  dikes,  breakwaters,  and 
revetments,  and  by  changing  the  channels  of  streams  to  prevent 
cutting,  washing,  and  sliding  of  embankments. 

Train  Service. — The  cost  of  work-train  service  in  connection 
with  work  pertaining  to  roadway  maintenance. 

Track  Changes. — The  cost  of  roadway  work  in  connection 
with  taking  up  and  relocating  tracks. 


APPENDIX  B  293 

Other  Expenses. — ^The  cost  of  roadway  work  not  provided 
for  elsewhere,  such  as  official  roadway  inspection  train  service 
and  premiums  in  connection  with  roadway  maintenance. 

Note  D. — Tools  and  supplies  used  by  repair  men  and  watchmen  in 
roadway  maintenance  service  shall  be  charged  to  account  No.  271, 
"Small  tools  and  supplies." 

(Note  carefully  special  instructions,  sections  2  and  3.) 

203.  ROADWAY— DEPRECIATION. 

This  account  shall  include  charges  covering  the  current  loss 
from  depreciation  of  roadway.  (See  special  instructions,  sec- 
tion 8.) 

204.  UNDERGROUND  POWER  TUBES. 

This  account  shall  include  the  cost  of  repairing  power  tubes 
or  conduits  for  underground  contacts  of  electric  railways  or  for 
underground  cables  of  cable  traction  railways. 

(Note  carefully  special  instructions,  sections  2  and  3.) 

DETAILS   OP   UNDERGROUND    CONTACT    CONSTRUCTION 

(See  special  instructions,  section  22) 
Concrete  work.  Pulleys. 

Drain  pipes.  Sheaves. 

Manhole  covers.  Slot  rails. 

Manhole  frames.  Yokes. 

Note. — The  cost  of  replacing  track  rails,  other  track  material,  electric 
contract  rails,  and  insulators  shall  be  charged  to  the  accounts  provided 
for  such  expenses  and  not  to  this  account. 

205.  UNDERGROUND  POWER  TUBES— DEPRECIATION. 
This  account  shall  include  charges,  covering  the  current  loss 

from  depreciation  of  imderground  power  tubes.     (See  special 
instructions,  section  8.) 

206.  TUNNELS  AND  SUBWAYS. 

This  account  shall  include  the  cost  of  repairing,  ventilating, 
lighting,  and  watching  tunnels  and  subways  for  the  passage  of 
trains,  and  the  cost  of  special  tools  and  supplies  furnished  in 
connection  with  the  work. 

(Note  carefully  special  instructions,  sections  2  and  3.) 

Note. — The  cost  of  repairs  to  signals  and  to  roadway  and  tracks  in 
tunnels  shall  be  charged  to  the  appropriate  maintenance  of  way  accounta 
and  not  to  this  account. 


294  APPENDIX  B 

207.  TUNNELS  AND  SUBWAYS— DEPRECIATION. 

This  account  shall  include  charges  covering  the  current  loss 
from  depreciation  of  tunnels  and  subways.  (See  special  instruc- 
tions, section  8.) 

208.  BRIDGES,  TRESTLES,  AND  CULVERTS. 

This  account  shall  include  the  cost  of  repairing  (including 
fuel  and  supplies  used)  and  watching  bridges,  trestles,  and  cul- 
verts, including  altering  and  bracing  during  process  of  filling, 
removing  old  structures  in  connection  with  the  construction  of 
new  structures,  dredging  and  cleaning  water  channels  for  pro- 
tection, and  cleaning  culverts. 

The  bridges,  trestles,  and  culverts  referred  to  in  this  account 
include  only  structures  which  carry  the  carrier's  own  tracks. 

(Note  carefully  special  instructions,  sections  2  and  3.) 


DETAILS   OP  BBIDGE   8TBUCTUBES 

(See  special  instructions,  section  22) 

Abutments.  Guard  timbers. 

Bridge  signs.  Ice  breakers. 

Cofferdams.  Painting. 
Concrete   and  masonry  ends  for       Pier  protection. 

culverts.  Piers  and  foundations. 

Cribs.  Pipe  culverts. 
Decking,  including  gravel  for  fire       Retaining  walls. 

protection.  Riprap  around  abutments. 

Dike  protection.  Riprap  at  culvert  ends. 

Drainage  systems.  Supports. 

Draw  protection.  Water  channels. 
Drawbridge     engines     and     ma-       Waterproofing. 

chinery.  Wing  dams. 

False  work.  Wing  walls. 

Note. — ^When  a  part  or  the  entire  structure  of  a  bridge  or  trestle  is 
converted,  by  filling,  into  an  earth  embankment,  the  ledger  value  of  the 
structure,  or  of  the  portion  thereof  filled,  shall  be  credited  to  road  and 
equipment  account  No.  6,  "Bridges,  trestles,  and  culverts."  In  case 
the  bridge  is  used  in  lieu  of  a  temporary  trestle  for  the  purpose  of  filling, 
the  estimated  cost  of  such  a  temporary  trestle  shall  be  changed  to  road 
and  equipment  account  No.  3,  "Grading."  The  ledger  value  of  the 
structure,  or  portion  thereof,  filled,  less  the  value  of  the  salvage  and  the 
estimated  cost  of  trestle  charged  to  road  and  equipment  account  No.  3, 
"Grading,"  shall  be  charged  to  this  account. 


APPENDIX  B  295 

209.  BRIDGES,  TRESTLES,  AND  CULVERTS— DEPRE- 

CIATION. 

This  account  shall  include  charges  covering  the  current  loss 
from  depreciation  of  bridges,  trestles,  and  culverts.  (See  special 
instructions,  section  8.) 

210.  ELEVATED  STRUCTURES. 

This  account  shall  include  the  cost  of  repairing  elevated  struc- 
tures and  foundations  of  elevated  railway  systems. 
(Note  carefully  special  instructions,  sections  2  and  3.) 

211.  ELEVATED  STRUCTURES— DEPRECIATION. 

This  account  shall  include  charges  covering  the  current  loss 
from  depreciation  of  elevated  structures  and  foundations  of 
elevated  railway  systems.    (See  special  instructions,  section  8.) 

212.  TIES. 

This  account  shall  include  the  cost  of  cross,  switch,  bridge, 
and  other  track  ties  used  in  the  repairs  of  tracks. 

(Note  carefully  special  instructions,  sections  2  and  3.) 

Note  A. — The  cost  of  labor  for  unloading,  distributing,  and  putting 
ties  in  tracks,  the  cost  of  work-train  service  in  connection  with  the  dis- 
tribution of  the  ties  laid,  and  the  cost  of  picking  up  and  concentrating  or 
disposing  of  the  ties  released  shall  be  charged  to  account  No.  220,  "Track 
laying  and  surfacing." 

Note  B. — The  excess  cost  of  metal  ties  applied  in  place  of  wooden 
ties  over  the  cost  at  current  prices  of  replacing  in  kind  the  wooden  ties 
removed  shall  he  charged  to  road  and  equipment  account  No.  8,  "Ties." 

Note  C. — The  cost  of  ties  used  for  repairs  of  tracks  in  quarries  and 
ballast  pits  shall  be  included  in  the  appropriate  clearing  accounts,  and 
of  ties  used  for  repairs  of  tracks  on  car  floats  in  account  No.  323,  "Float- 
ing equipment — Repairs." 

213.  TIES— DEPRECIATION. 

This  account  shall  include  charges  covering  the  current  loss 
from  depreciation  of  ties.    (See  special  instructions,  section  8.) 

214.  RAILS. 

This  account  shall  include  the  cost  (less  salvage)  of  rails  used 
in  the  repairs  of  tracks;  also  the  difference  between  the  cost  (at 
current  prices  at  time  of  removal)  of  heavy  rails  removed  and 
the  cost  of  lighter  rails  applied  in  repairs  of  tracks. 

(Note  carefully  special  instructions,  sections  2  and  3.) 


296  APPENDIX  B 

Note  A. — The  cost  of  labor  for  unloading,  distributing,  and  putting 
rails  in  tracks,  the  cost  of  work-train  service  in  connection  with  the  dis- 
tribution of  the  rails  laid,  and  the  cost  of  picking  up  and  concentrating 
the  rails  released  shall  be  charged  to  account  No.  220,  "Track  laying 
and  surfacing." 

Note  B. — The  excess  cost  of  heavier  rails  or  rails  of  improved  quality 
or  type  applied  in  repairs  of  tracks  over  the  cost,  at  current  prices,  of 
rails  of  the  weight,  type,  and  quality  released  shall  be  charged  to  road 
and  equipment  account  No.  9,  "Rails." 

Note  C. — The  cost  of  rails  used  for  repairs  of  tracks  in  quarries  and 
ballast  pits  shall  be  included  in  the  appropriate  clearing  accounts,  and 
of  rails  used  for  repairs  of  tracks  on  car  floats  to  account  No.  323,  "Float- 
ing   equipment — Repairs . ' ' 

215.  RAILS— DEPRECIATION. 

This  account  shall  include  charges  covering  the  current  loss 
from  depreciation  of  rails.    (See  special  instructions,  section  8.) 

216.  OTHER  TRACK  MATERIAL. 

This  account  shall  include  the  cost  (less  salvage)  of  all  track 
material  used  in  the  repairs  of  tracks,  other  than  ballast,  ties, 
and  rails. 

(Note  carefully  special  instructions,  sections  2  and  3.) 

ITEMS  OF  OTHER  TRACK  MATERIAL 

(See  special  instructions,  section  22) 

Angle  bars.  Rail  splices. 

Anticreepers.  Splice  bars. 

Connecting  rods.  Step  chairs. 

Derails.  Switch  chairs. 

Frog  and  guard-rail  blocking.  Switch  crossings. 

Frogs.  Switch  lamps. 

Guard-rail  clamps.  Switch  locks  and  keys. 

Guard-rail  fasteners.  Switch  points. 

Guard  rails.  Switch  stands. 

Main  rods.  Switch-stand  bolts. 

Nut  locks.  Switch  targets. 

Nuts.  Switches. 

Offset  bars.  Tie  plates. 

Rail  braces.  Tie  plugs. 

Rail  chairs.  Tie-rods. 

Rail  clips.  Track  bolts. 

Rail  joints.  Track  insulators. 

Rail  rests.  Track  spikes. 
Rail  shims. 

Note  A. — The  cost  .of  labor  and  train  service  for  distributing,  un- 
loading, and  applying  "other  track  material"  used,  and  the  cost  of 
picking  up  and  concentrating  the  material  released  shall  be  charged  to 
account  No.  220,  "Track  laying  and  surfacing." 


APPENDIX  B  297 

Note  B. — The  excess  cost  of  improved  or  heavier  track  material  ap- 
plied for  repairs  of  tracks,  under  a  definite  plan  of  changing  standards, 
over  the  cost,  at  current  prices,  of  material  of  the  same  weight  and 
quality  as  that  released,  shall  be  charged  to  road  and  equipment  account 
No.  10,  "Other  track  material." 

Note  C. — The  cost  of  "other  track  material"  used  for  repairs  of 
tracks  in  quarries  and  ballast  pits  shall  be  included  in  the  appropriate 
clearing  accounts,  and  of  such  track  material  used  for  repairs  of  tracks 
on  car  floats  in  account  No.  323,  "Floating  equipment — Repairs." 

217.  OTHER  TRACK  MATERIAL— DEPRECIATION. 
This  account  shall  include  charges  covering  the  current  loss 

from  depreciation  of  "other  track  material."    (See  special  in- 
structions, section  8.) 

218.  BALLAST. 

This  account  shall  include  the  cost  of  gravel,  stone,  slag, 
cinders,  sand,  and  like  ballast  material  used  in  the  repairs  of 
tracks,  including  the  cost  of  work-train  service  and  of  unloading 
the  material.    (See  special  instructions,  section  11.) 

When  the  ballast  taken  from  a  pit  is  not  sufficient  to  justify 
the  opening  of  a  clearing  account,  the  cost  of  gravel  and  quarry 
rights  and  cost  of  sinking  test  holes  shall  be  included  in  this 
account. 

(Note  carefully  special  instructions,  sections  2  and  3.) 

Note  A. — The  cost  of  loading  cinders  at  ash  pits  shall  be  charged  to 
account  No.  388,  "Enginehouse  expenses — Yard,"  or  to  account  No.  400, 
"Enginehouse  expenses — Train."  No  charge  to  cover  the  value  of 
cinders  accumulated  by  the  carrier  shall  be  included  in  this  account. 

Note  B. — The  cost  of  labor  putting  ballast  in  tracks  shall  be  included 
in  account  No.  220,  "Track  laying  and  surfacing." 

Note  C. — The  excess  cost  of  ballasting  tracks  over  the  cost  of  replac- 
ing in  kind  to  its  maximum  height  and  width  the  ballast  previously  put 
in  the  roadbed  shall  be  charged  to  road  and  equipment  account  No.  11, 
"BaUast." 

Note  D. — Earth  placed  to  form  a  crown  in  the  middle  of  the  track 
is  not  to  be  considered  as  ballast. 

Note  E. — The  cost  of  ballast  used  for  repairs  of  temporary  tracks, 
such  as  gravel  pit  or  quarry  tracks,  shall  be  included  in  the  appropriate 
clearing  accounts. 

219.  BALLAST— DEPRECIATION. 

This  account  shall  include  charges  covering  the  current  loss 
from  depreciation  of  ballast.    (See  special  instructions,  section  8.) 


298  APPENDIX  B 

220.  TRACK  LAYING  AND  SURFACING. 

This  account  shall  include: 

Applying  Ballast. — The  cost  of  labor  expended  in  preparing 
the  roadbed,  and  applying  ballast  for  repairs  of  tracks. 

Applying  Ties. — The  cost  of  labor  expended  in  unloading, 
distributing,  and  applying  ties  for  repairs  of  tracks;  in  gathering 
up  and  disposing  of  the  ties  released;  and  in  respacing  ties. 

Applying  Rails. — The  cost  of  labor  expended  in  unloading, 
distributing,  cutting,  slotting,  drilling,  adzing  for,  and  laying 
rails  for  repairs  of  tracks;  in  gathering  up  and  loading  rails  re- 
leased; and  in  adjusting  for  expansion  and  contraction  of  rails. 

Applying  other  Track  Materl^l. — The  cost  of  labor  ex- 
pended in  unloading,  distributing,  and  applying  other  track 
material  for  repairs  of  tracks;  and  the  cost  of  gathering  up  and 
loading  the  material  released. 

Track  Maintenance. — The  cost  of  labor  expended  in  alining, 
surfacing,  gauging,  and  shimming  tracks;  in  tightening  track 
bolts  and  track  spikes;  in  restoring  rails,  ties,  and  ballast  in  case 
of  washouts,  derailments,  and  wrecks;  and  in  taking  up  tracks. 

Train  Service. — The  cost  of  work-train  service  (except  work 
trains  distributing  ballast  material)  in  connection  with  work 
pertaining  to  track  laying  and  surfacing. 

Track  Changes. — The  cost  of  track  work  (exclusive  of  the 
cost  of  track  material)  in  taking  up  and  relocating  tracks. 

Other  Expenses. — The  cost  of  track  laying  and  surfacing 
work  not  provided  for  elsewhere,  and  expenses,  such  as  repair- 
ing and  replacing  rail  rests,  official  track  inspection  train  service, 
and  premiums  in  connection  with  track  repairs. 

(Note  carefully  special  instructions,  sections  2  and  3.) 

Note. — Tools  and  supplies  used  by  track  repair  men  and  watchmen 
shall  be  charged  to  account  No.  271,  "Small  tools  and  supplies." 

221.  RIGHT-OF-WAY  FENCES. 

This  account  shall  include  the  cost  of  repairing  right-of-way 
fences  (including  permanent  snow  and  sand  fences  in  lieu  of 
ordinary  right-of-way  fences),  farm  gates,  cattle  guards,  wing 
fences,  aprons,  and  hedges,  except  those  around  stockyards, 
fuel  stations,  station  and  shop  grounds,  and  building  sites. 

(Note  carefully  special  instructions,  sections  2  and  3.) 


APPENDIX  B  299 

222.  RIGHT-OF-WAY  FENCES— DEPRECIATION. 

This  account  shall  include  charges  covering  the  current  loss 
from  depreciation  of  right-of-way  fences.  (See  special  instruc- 
tions, section  8.) 

223.  SNOW  AND  SAND  FENCES  AND  SNOWSHEDS. 

This  account  shall  include  the  cost  of  repairing  permanent 
and  portable  snow  and  sand  fences  and  snowsheds  for  the  pro- 
tection of  tracks  from  snow  and  sand,  including  rent  of  land 
for  placing  snow  and  sand  fences. 

(Note  carefully  special  instructions,  sections  2  and  3.) 

Note  A. — The  cost  of  repairing  permanent  snow  and  sand  fences 
which  take  the  place  of  right-of-way  fences  shall  be  included  in  account 
No.  221,  "Right-of-way  fences." 

Note  B. — The  cost  of  setting  up,  taking  down,  and  storing  portable 
snow  and  sand  fences  shall  be  included  in  account  No.  272,  "Removing 
snow,  ice,  and  sand." 

224.  SNOW  AND  SAND  FENCES  AND  SNOWSHEDS— 

DEPRECIATION. 
This  account  shall  include  charges  covering  the  current  loss 
from  depreciation  of  snow  and  sand  fences  and  snowsheds.    (See 
special  instructions,  section  8.) 

225.  CROSSINGS  AND  SIGNS. 

This  account  shall  include  the  cost  of  repairing  farm  passes, 
highway  crossings,  and  crossings  of  other  railways  crossing  the 
carrier's  right  of  way,  except  railways  crossing  at  grade;  also 
cost  of  repairing  track  signs. 

(Note  carefully  special  instructions,  sections  2  and  3.) 

DETAILS   OF   GRADE    CROSSINGS 

(See  special  instructions,  section  22) 

Batteries,  with  track  instruments  Planking. 

and  connections,  including  bat-  Soil  crossing  drains. 

tery  renewals.  Watch  houses  at  crossings. 

Crossing  gates.  Warning  signals. 

Crossing  signal  bells.  Water  for  sprinkling  grade  cross- 
Hose  for  sprinkling  grade   cross-  ings. 

ings.  Water  pipes. 
Paving. 


300  APPENDIX  B 

DETAILS   OP   OVERGRADE    CROSSINGS 

(See  special  instructions,  section  22) 

Bridge  substructures.  Piers,  including  foundations. 

Bridge  superstructures.  Retaining  and  wing  walls,  includ- 

Decking,  including  roadways.  ing  foundations. 
Drainage  systems. 

DETAILS    OF    UNDERGRADE    CROSSINGS 

(See  special  instructions,  section  22) 

Drainage  systems.  Roadways  and  sidewalks. 

Retaining  walls,  outside  of  bridge       Curbing, 
abutments. 

LIST   OF   SIGNS 

(See  special  instructions,  section  22) 

Boundary  signs.  Subdivision  boards. 

Mile  signs.  Tunnel  caution  signs. 

Monument  stones.  Water  station  signs. 

Overhead-bridge  caution  signs.  Water  trough  signs. 

Section  signs.  Whistle  signs. 

Slow  or  stop  signs.  Yard-limit  signs. 

Note  A. — The  cost  of  repairing  shop  and  station  overgrade  footbridges 
and  subways  not  public  highways  shall  be  included  in  repairs  of  such 
buildings. 

Note  B. — The  cost  of  repairing  a  bridge  or  other  structure  which 
carries  the  track  of  another  carrier  over  the  accounting  carrier's  tracks 
shall  be  included  in  this  account.  The  cost  of  repairing  bridges  or  trestles, 
carrying  the  carrier's  tracks  over  roads,  highways,  or  other  railways, 
shall  be  charged  to  account  No.  208,  "Bridges,  trestles,  and  culverts." 

Note  C. — The  cost  of  repairing  bridge  signs  shall  be  included  in  ac- 
count No.  208,  "Bridges,  trestles,  and  culverts." 

226.  CROSSINGS  AND  SIGNS— DEPRECIATION. 

This  account  shall  include  charges  covering  the  current  losa 
from  depreciation  of  crossings  and  signs.  (See  special  instruc- 
tions, section  8.) 

227.  STATION  AND  OFFICE  BUILDINGS. 

This  account  shall  include  the  cost  of  repairing  station  and 
office  buildings,  fixtures,  and  appurtenances  (including  those 
for  heating  and  lighting),  used  by  the  carrier  in  its  operations; 
also  the  cost  of  maintaining  grounds  appurtenant  to  such  build- 
ings. 

(Note  carefully  special  instructions,  sections  2  and  3.) 


APPENDIX  B 


301 


STATION  AND   OFFICE   STRUCTURES  AND  DETAILS 

(See  special  instructions,  section  22) 


(not 


Baggage  rooms. 

Breakwaters     for     protection     of 

buildings. 
Buildings  and  rooms  for  trainmen. 
Buildings  on  piers. 
Call  bells. 
Coal  bins. 
Coal-transferring  machinery   (not 

on  coal  and  ore  wharves). 
Coal  trestles  (not  at  fuel  stations) . 
Commissarial  buildings. 
Drainage  and  sewer  systems. 
Dwellings. 
Eating  houses. 
Electric  wiring. 
Elevators  and  machinery. 
Express  buildings. 
Fences. 

Fire-engine  houses. 
Freight  cranes. 
Freight  derricks. 
Freight  handling  machinery. 
Freight  houses. 
Garages. 

Gas-supply  systems. 
General  office  buildings. 
Grain  cribs. 
Grain  elevators. 
Grain  warehouses. 
Greenhouses. 
Hay  houses. 
Heating  plants. 
Hedges. 
Hoisting    engines,     for    handling 

freight. 
Hose  houses. 
Ice  houses. 
Lighting  plants. 
Mail  cranes. 

Note. — Incidental  cleaning,  including  the  cost  of  cleaning  snow  from 
roofs,  when  done  by  station  or  office  employees,  shall  not  be  included  in 
this  account. 

228.  STATION  AND  OFFICE  BUILDINGS— DEPRECIA- 
TION. 
This  account  shall  include  charges  covering  the  current  loss 
from  depreciation  of  station  and  office  buildings.    (See  special 
instructions,  section  8.) 


Milk  stands. 

Office  buildings. 

Ore  transferring    machinery 
on  coal  and  ore  wharves). 

Outhouses. 

Pavement  in  ground  limits. 

Platforms,  freight. 

Platforms,     passenger,     including 
planking  between  tracks. 

Power    distribution    systems,    in- 
terior. 

Reading  rooms. 

Rooms  for  Y.  M.  C.  A. 

Scale  houses. 

Sidewalks. 

Stables. 

Station  footbridges  (not  highway 
crossings). 

Station  intertrack  fences. 

Station  platforms. 

Station  signs. 

Station  stairways. 

Station    subways    (not    highway 
crossings). 

Station  power  houses. 

Stations,  freight. 

Stations,  passenger. 

Stock  pens. 

Storehouses. 

Telegraph  offices. 

Telpher  systems. 

Track  scales. 

Transfer  houses. 

Transfer  platforms. 

Waiting  rooms. 

Warehouses. 

Washrooms. 

Water-supply  systems. 


302  APPENDIX  B 

229.  ROADWAY  BUILDINGS. 

This  account  shall  include  the  cost  of  repairing  roadway  shops 
and  other  roadway  buildings,  including  drainage,  water,  gas, 
and  sewer  pipes  and  their  connections,  machinery  and  other 
apparatus,  fixtures,  and  furniture  in  the  buildings;  also  the  cost 
of  maintaining  the  grounds  appurtenant  to  such  buildings. 

(Note  carefully  special  instructions,  sections  2  and  3.) 

LIST   OF   HOADWAT    STRUCTURES 

(See  special  instructions,  section  22) 

Bins  for  material.  Offices. 

Blacksmith  shops.  Outhouses. 

Boarding  houses.  Planing  mills. 

Breakwaters  for  protection  of  Rail  shops  used  solely  for  repairs 

buildings.  of  track  material. 

Carpenter  shops.  Repair  shops. 

Dwellings  for  roadway  employees.  Scrap  bins. 

Fire-engine  houses.  Section  dwelling  houses. 

Frog  shops  used  solely  for  repairs  Stables. 

of  track  material.  Storehouses. 

Hand-car  houses.  Tool  houses. 

Lumber  sheds.  Watch  houses. 

Note  A. — The  cost  of  repairing  signal  and  interlocker  buildings  and 
their  appurtenances  shall  be  included  in  account  No.  249,  "Signals  and 
interlockers." 

Note  B. — Incidental  cleaning,  including  the  cost  of  cleaning  snow 
from  roofs,  when  done  by  employees  regularly  working  in  the  buildings, 
shall  not  be  included  in  this  account. 

230.  ROADWAY  BUILDINGS— DEPRECIATION. 

This  account  shall  include  charges  covering  the  current  loss 
from  depreciation  of  roadway  buildings.  (See  special  instruc- 
tions, section  8.) 

231.  WATER  STATIONS. 

This  account  shall  include  the  cost  of  repairing  water  stations, 
fixtures,  and  appurtenances  used  by  the  carrier  in  its  operations, 
and  the  cost  of  maintaining  the  grounds  appurtenant  to  such 
stations. 

(Note  carefully  special  instructions,  sections  2  and  3.) 


APPENDIX  B  305 

WATER   STATION   STRUCTURES  AND    DETAILS 

(See  special  instructions,  section  22) 
Boilers.  Reservoirs. 

Breakwaters     for     protection     of       Settling  basins.  ^ 

buildings.  Stationary  engines. 

Buildings  on  piers.  Steam  pipes. 

Cisterns.  Tanks  and  foundations. 

Dams.  Track  tanks. 

Fences.  Tubs. 

Outhouses.  Water  cranes. 

Penstocks.  Water-pipe  lines. 

Pump  houses.  Water-treating  plants. 

Pumps.  Wells. 

Purifying  plants.  Windmills. 

Note. — Incidental  cleaning,  including  the  cost  of  cleaning  snow  from 
roofs,  when  done  by  water  station  employees,  shall  not  be  included  in 
this  account. 

232.  WATER  STATIONS— DEPRECIATION. 

This  account  shall  include  charges  covering  the  current  loss 
from  depreciation  of  water  stations.  (See  special  instructions, 
section  8.) 

233.  FUEL  STATIONS. 

This  account  shall  include  the  cost  of  repairing  fuel  stations, 
fixtures,  and  appurtenances  used  by  the  carrier  in  its  operations, 
and  the  cost  of  maintaining  the  grounds  appurtenant  to  such 
stations. 

(Note  carefully  special  instructions,  sections  2  and  3.) 

FUEL   STATION   STRUCTURES  AND   DETAILS 

(See  special  instructions,  section  22) 
Breakwaters     for     protection     of       Fuel-oil  pumps, 

buildings.  Fuel-oil  sumps. 

Buckets.  Fuel-oil  tanks. 

Buildings  on  piers.  Fuel  platforms. 

Coal  buggies.  Fuel  wharves. 

Coal  hoists.  Inclines. 

Coal  pockets  and  chutes.  Outhouses. 

Dumping  machinery.  Scales. 

Elevating  machinery.  Sheds. 

Fences.  Stationary  engines. 

Fuel  houses.  Tipple  cars. 

Fuel-oil  columns.  Weighing  apparatus. 

Fuel-oil  plants.  Wood  racks. 

Note. — Incidental  cleaning,  including  the  cost  of  cleaning  snow  from 
roofs,  when  done  by  fuel  station  employees,  shall  not  be  included  in  this 
account. 


804 


APPENDIX  B 


234.  FUEL  STATIONS— DEPRECIATION. 

This  account  shall  include  charges  covering  the  current  loss 
from  depreciation  of  fuel  stations.  (See  special  instructions, 
section  8.) 

235.  SHOPS  AND  ENGINEHOUSES. 

This  account  shall  include  the  cost  of  repairing  shop  and 
enginehouse  buildings,  fixtures,  and  appurtenances  used  by  the 
carrier  in  repairing  and  preparing  equipment,  and  the  cost  of 
maintaining  the  grounds  appurtenant  to  such  buildings. 

(Note  carefully  special  instructions,  sections  2  and  3.) 

SHOP  AND   ENGINEHOUSE    STBUCTURES   AND    DETAILS 

(See  special  instructions,  section  22) 


Air-compressor  houses. 

Ash  pits  and  pockets. 

Ash  plants. 

Bins  for  material. 

Blacksmith  shops. 

Breakwaters  for  protection  of 
buildings. 

Buildings  on  piers. 

Car  sheds. 

Car  shops. 

Carpenter  shops. 

Cinder  pits. 

Cinder  pocketi. 

Drop  pits. 

Dry  houses. 

Electric-power  distribution  sys- 
tems within  buildings. 

Enginehouses. 

Fire-engine  houses. 

Footbridges  (not  public  highways). 

Foundries. 

Gas-compressor  houses. 

Heating  plants. 

Hose  houses. 

Ice  houses. 

Laboratories. 

Lighting  plants. 

Lumber  sheds. 

Machine  shops. 

Material  and  supply  truck  tracks. 

Motor-crane  tracks. 

Note  A. — The  cost  of  repairing  machinery  and  other  apparatus,  in- 
cluding special  foundations,  in  shops  for  maintenance  of  equipment 
shall  be  included  in  account  No.  302,  "Shop  machinery." 


Offices,  shop. 

Oil  houses. 

Outhouses. 

Paint  shops. 

Pipe  lines,  air,  interior. 

Pipe  lines,  car-heating. 

Pipe  lines,  gas,  interior. 

Planing  mills. 

Platforms,  shop  and  yard. 

Repair  shops. 

Sand  houses. 

Scale  houses. 

Scrap  bins. 

Sidewalks. 

Stables. 

Steam    distribution    syitems, 

terior. 
Storehouses. 
Tanks,  gas. 
Tanks,  oil. 
Test  rooms. 
Tin  shops. 
Tool  houses. 
Track  scales. 
Transfer  tables. 
Turntables. 
Upholstering  shops. 
Warehouses. 
Wash  rooms. 
Watch  houses. 


APPENDIX  B  305 

Note  B. — Incidental  cleaning,  including  the  cost  of  cleaning  snow 
from  roofs,  when  done  by  shop  employees,  shall  not  be  included  in  this 
account. 

236.  SHOPS  AND  ENGINEHOUSES— DEPRECIATION. 

This  account  shall  include  charges  covering  the  current  loss 
from  depreciation  of  shops  and  enginehouses.  (See  special  in- 
structions, section  8.) 

237.  GRAIN  ELEVATORS. 

This  account  shall  include  the  cost  of  repairing  structures  for 
the  transfer,  treatment,  and  storage  of  grain,  including  con- 
veyors, machinery  and  fixtures;  also  the  cost  of  maintaining 
the  grounds  appurtenant  to  such  buildings. 

The  buildings  referred  to  in  this  account  are  large  elevators  in 
which  a  regular  grain  business  is  handled  or  grain  is  stored  for 
various  owners. 

(Note  carefully  special  instructions,  sections  2  and  3.) 

Note  A. — Small  storage  elevators  at  way  stations,  where  the  freight 
is  received  for  shipment,  etc.,  are  classed  as  station  buildings. 

Note  B. — Incidental  cleaning,  including  the  cost  of  cleaning  snoW 
from  roofs,  when  done  by  grain  elevator  employees  shall  not  be  included 
in  this  account. 

238.  GRAIN  ELEVATORS— DEPRECIATION. 

This  account  shall  include  charges  covering  the  current  loss 
from  depreciation  of  grain  elevators.  (See  special  instructions, 
section  8.) 

239.  STORAGE  WAREHOUSES. 

This  account  shall  include  the  cost  of  repairing  storage  ware- 
houses, including  machinery  and  fixtures  therein;  also  the  cost 
of  maintaining  the  grounds  appurtenant  to  such  warehouses. 

The  buildings  referred  to  herein  are  not  the  ordinary  freight 
warehouses  or  stations  where  freight  is  received  for  shipment, 
etc.,  but  are  warehouses  in  which  merchandise  is  stored  and 
which  the  carrier  operates  as  storage  warehouses. 

(Note  carefully  special  instructions,  sections  2  and  3.) 

Note. — Incidental  cleaning,  including  the  cost  of  cleaning  snow 
from  roofs,  when  done  by  storage  warehouse  employees,  shall  not  be 
included  in  this  account. 


306  APPENDIX  B 

240.  STORAGE  WAREHOUSES— DEPRECIATION. 

This  account  shall  include  charges  covering  the  current  loss 
from  depreciation  of  storage  warehouses.  (See  special  instruc- 
tions, section  8.) 

241.  WHARVES  AND  DOCKS. 

This  account  shall  include  the  cost  of  repairing  wharves  located 
at  marine,  lake,  or  river  docks;  dredging  waterways  to  approaches 
and  around  such  structures,  including  removal  of  dredged-out 
material;  and  cutting  ice  in  and  around  docks  and  wharves  to 
prevent  damage;  also  cost  of  repairs  of  cribwork,  racks,  or 
caissons  for  preserving  the  depth  of  water  in  docks;  and  cost  of 
repairs  of  guards,  piling,  and  other  protection  against  damage  by 
drift  or  ice. 

(Note  carefully  special  instructions,  sections  2  and  3.) 

DETAILS   OF   WHARVES    AND    DOCKS 

(See  special  instructions,  section  22) 

Bridge  pontoons.  Ferry  bridges. 

Bulkheads.  Ferry  racks. 

Caissons.  Ferry  slips. 

Cribwork.  Jetties  and  inclines. 

Dry  docks.  Transfer-bridge  machinery. 

Ferry-bridge  machinery.  Transfer  bridges. 

Note  A. — The  cost  of  repairing  buildings,  tracks,  and  machinery 
(not  bridge  machinery)  on  wharves  and  piers  shall  be  charged  to  the  ap- 
propriate expense  accounts. 

Note  B. — The  cost  of  repairing  coal  and  ore  wharves  shall  be  charged 
to  account  No.  243,  "Coal  and  ore  wharves." 

Note  C. — Incidental  cleaning,  when  done  by  regular  wharf  employees, 
shall  not  be  included  in  this  account. 

242.  WHARVES  AND  DOCKS— DEPRECIATION. 

This  account  shall  include  charges  covering  the  current  loss 
from  depreciation  of  wharves  and  docks.  (See  special  instruc- 
tions, section  8.) 

243.  COAL  AND  ORE  WHARVES. 

This  account  shall  include  the  cost  of  repairing  wharves  and 
docks,  including  the  cost  of  repairing  conveyors,  machinery,  and 
fixtures  for  the  transfer,  treatment,  blending,  or  storage  of  coal 
or  ore. 

(Note  carefully  special  instructions,  sections  2  and  3.) 


APPENDIX  B  307 

Note  A. — The  structures  referred  to  in  this  account  do  not  include 
small  transfer  or  storage  trestles  at  stations  where  coal  is  stored  or  de- 
livered, such  trestles  being  classed  as  station  buildings. 

Note  B. — Incidental  cleaning,  including  the  cost  of  cleaning  snow 
from  roofs,  when  done  by  coal  and  ore  wharf  employees,  shall  not  be  in- 
cluded in  this  account. 

244.  COAL  AND  ORE  WHARVES— DEPRECIATION. 
This  account  shall  include  charges  covering  the  current  loss 

from  depreciation  of  coal  and  ore  wharves.    (See  special  instruc- 
tions, section  8.) 

245.  GAS  PRODUCING  PLANTS. 

This  account  shall  include  the  cost  of  repairing  gas  producing 
and  gas  compressing  plants,  including  the  machinery  and  ap- 
pliances in  such  plants;  also  the  cost  of  maintaining  the  grounds 
appurtenant  to  such  plants. 

(Note  carefully  special  instructions,  sections  2  and  3.) 

Note. — Incidental  cleaning,  including  the  cost  of  cleaning  snow  from 
roofs,  when  done  by  employees  of  the  gas  producing  plant,  shall  not  be 
included  in  this  account. 

246.  GAS  PRODUCING  PLANTS— DEPRECIATION. 

This  account  shall  include  charges  covering  the  current  loss 
from  depreciation  of  gas  producing  plants  and  gas  compressing 
plants.    (See  special  instructions,  section  8.) 

247.  TELEGRAPH  AND  TELEPHONE  LINES. 

This  account  shall  include: 

Telegraph. — The  cost  of  repairs  of  telegraph  outside  plant 
and  terminal  equipment  for  which  the  carrier  is  responsible,  in- 
cluding the  cost  of  work-train  service  and  of  special  tools  pro- 
vided for  the  work. 

Telephone. — The  cost  of  repairs  of  telephone  outside  plant 
and  terminal  equipment  for  which  the  carrier  is  responsible, 
including  the  cost  of  work-train  service  and  of  special  tools 
provided  for  the  work. 

(Note  carefully  special  instructions,  sections  2  and  3.) 


308  APPENDIX  B 

DETAILS  OF  TELEGRAPH  AND   TELEPHONE   TERMINAL    EQUIPMENT 

(See  special  instructions,  section  22) 

Batteries.  Fuses  and  mechanical  protectors. 

Cables  and  wires,  interior.  Rectifiers. 

Conduits,  interior.  Rheostats. 

Connecting  wires.  Sending  and  receiving  instruments. 

Current-controlling  instruments.  Switchboards, 

Electric  generators  and  motors.  Testing  outfits. 

Electric  meters.  Transformers. 

Engines,  stationary. 

DETAILS   OP  TELEGRAPH   AND   TELEPHONE    OUTSIDE    PLANT 

(See  special  instructions,  section  22) 

Aerial  attachments.  Guy  wires. 

Braces.  Insulators. 

Brackets.  Poles. 

Cable  boxes  and  appurtenances.  Submarine  cables  and  connections. 

Cables  and  wires,  aerial.  Telephone  pole  boxes. 

Conduits  and  appurtenances.  Towers. 

Cross  arms.  Underground  cables  and  connec- 

Guy  stubs.  tions. 

Note. — The  salaries,  rent,  other  office  expenses,  and  traveling  ex- 
penses of  superintendents  of  telegraph  and  telephone,  their  assistants, 
clerks,  and  attendants,  when  engaged  both  in  maintaining  and  operat- 
ing telegraph  and  telephone  lines,  shall  be  apportioned  equally  between 
this  account  and  account  No.  407,  "Telegraph  and  telephone  operation." 

248.  TELEGRAPH  AND  TELEPHONE  LINES— DEPRE- 

CIATION. 
This  account  shall  include  charges  covering  the  current  loss 
from  depreciation  of  telegraph  and  telephone  lines.    (See  special 
instructions,  section  8.) 

249.  SIGNALS  AND  INTERLOCKERS. 

This  account  shall  include  the  cost  of  repairing  signals  and 
interlockers  governing  the  movement  of  trains,  including  salaries, 
rent,  and  other  office  expenses,  and  the  traveling  expenses  of 
division  signal  engineers,  signal  supervisors,  their  assistants, 
clerks,  and  attendants;  also  the  cost  of  special  tools  furnished 
for  such  work. 

(Note  carefully  special  instructions,  sections  2  and  3.) 


APPENDIX  B 


309 


DSTAIIiS   OF   SIGNALS   AND   INTERLOCKERS 

(See  special  instructions,  section  22) 


Air  compressors. 
Batteries. 
Boilers. 

Distant  signals. 
Dynamos. 

Engines,  stationary. 
Gates  at  crossings  of  otlier  rail- 
roads. 
Home  signals. 
Interlocker  buildings. 
Interlocker  machinery. 
Interlocker  mechanism. 
Levers. 

Power  transmission  lines. 
Rail  bonds. 

Railway-crossing  signals. 
Relays. 


Semaphores. 

Signal  and  switch  levers. 
Signal  arms. 
Signal  blades. 
Signal  bridges. 
Signal  buildings. 

Signal  lamp  brackets  and  connec- 
tions. 
Signal  lamps. 
Signal  machinery. 
Signal  poles  and  foundations. 
Signal  pulleys  and  foundations. 
Special  appliances. 
Station  signals. 
Train-order  signals. 
Wiring. 


Note. — The  cost  of  repairing  track  material,  such  as  switches,  special 
track  fastenings,  split  rails,  and  frogs  used  in  connection  with  inter- 
lockers,  shall  be  charged  to  account  No.  216,  "Other  track  material." 

250.  SIGNALS  AND  INTERLOCKERS— DEPRECIATION. 

This  account  shall  include  charges  covering  the  current  loss 
from  depreciation  of  signals  and  interlockers.  (See  special  in- 
structions, section  8.) 

251.  POWER  PLANT  DAMS,  CANALS,  AND  PIPE  LINES. 

This  account  shall  include  the  cost  of  repairing  dams,  canals, 
and  pipe  lines  and  accessories  devoted  to  the  utilization  of  water 
power  for  the  operation  of  trains  and  cars,  and  to  furnish  power, 
heat,  and  light  for  general  purposes. 

(Note  carefully  special  instructions,  sections  2  and  3.) 


DETAILS   OF   DAMS,    CANALS   AND    PIPE    LINES 

(See  special  instructions,  section  22) 

Aqueducts.  Penstocks. 

Bridges.  Reservoirs. 

Fences.  Roadways. 

Footbridges.  Sluices. 

Fore  bays.  Valves. 

Gates.  Viaducts. 

Grids.  Walls. 
Inlet  valves. 


310  APPENDIX  B 

252.  POWER  PLANT  DAMS,  CANALS,  AND  PIPE  LINES- 

DEPRECIATION. 

This  account  shall  include  charges  covering  the  current  loss 
from  depreciation  of  power  plant  dams,  canals,  and  pipe  lines. 
(See  special  instructions,  section  8.) 

253.  POWER  PLANT  BUILDINGS. 

This  account  shall  include  the  cost  of  repairing  the  buildings 
of  power  plants  which  furnish  power  for  the  operation  of  trains 
and  cars,  and  furnish  power,  heat,  and  light  for  general  purposes, 
including  distinct  power  plant  buildings  at  shops;  drainage, 
water,  and  sewer  pipes  and  their  connections;  miscellaneous 
furniture  and  fixtures;  and  the  cost  of  maintaining  the  grounds 
appurtenant  to  such  buildings. 

(Note  carefully  special  instructions,  sections  2  and  3.) 

Note  A. — The  cost  of  repairing  machinery  and  other  apparatus  in 
general  power  plants  shall  be  included  in  account  No.  304,  "Power  plant 
machinery." 

Note  B. — Incidental  cleaning,  including  the  cost  of  cleaning  snow 
from  roofs,  when  done  by  power  plant  employees,  shall  not  be  included 
in  this  account. 

254.  POWER  PLANT  BUILDINGS— DEPRECIATION. 

This  account  shall  include  charges  covering  the  current  loss 
from  depreciation  of  power  plant  buildings.  (See  special  in- 
structions, section  8.) 

255.  POWER  SUBSTATION  BUILDINGS. 

This  account  shall  include  the  cost  of  repairing  buildings  of 
power  substations,  including  storage-battery  stations,  used  to 
transform  power  for  the  operation  of  trains  and  cars,  and  to 
furnish  power,  heat,  and  light  for  general  purposes;  drainage, 
water,  and  sewer  pipes  and  their  connections;  fixtures,  including 
wiring  for  lighting  and  heating;  and  miscellaneous  furniture 
and  fixtures;  also  the  cost  of  maintaining  the  grounds  appur- 
tenant to  such  buildings. 

(Note  carefully  special  instructions,  sections  2  and  3.) 

Note  A. — The  cost  of  repairing  substation  apparatus  for  transform- 
ing or  storing  power  in  power  substations  shall  be  included  in  account 
No.  306,  "Power  substation  apparatus." 


APPENDIX  B  811 

Note  B. — Incidental  cleaning,  including  the  cost  of  cleaning  snow 
from  roofs,  when  done  by  substation  employees,  shall  not  be  included  in 
this  account. 

256.  POWER    SUBSTATION    BUILDINGS— DEPRECIA- 
.  TION. 

This  account  shall  include  charges  covering  the  current  loss 
from  depreciation  of  power  substation  buildings.  (See  special 
instructions,  section  8.) 

257.  POWER  TRANSMISSION  SYSTEMS. 

This  account  shall  include  the  cost  of  repairing  systems  for 
transmitting  high-tension  power  from  power  houses  to  the 
point  where  transformed  for  use,  including  the  cost  of  work-train 
service  and  special  tools  furnished  for  such  work. 

(Note  carefully  special  instructions,  sections  2  and  3.) 

DETAILS   OF   POWER   TRANSMISSION    SYSTEMS 

(See  special  instructions,  section  22) 

Cables.  Span  wires. 

Cut-outs  (not  at  power  houses  and  Switchboards  (not  at  power  houses 

substations).  and  substations). 

Feed  wires.  Transformers  (not  at  power  houses 

Guard  wires.  and  substations). 
Insulators  and  connections. 

Note  A. — The  cost  of  repairing  track  material,  such  as  insulated  rail 
splices  used  in  connection  with  transmission  systems  shall  be  charged 
to  account  No.  216,  "Other  track  material." 

Note  B. — When  the  electric  current  generated  or  received  is  changed 
by  means  of  (a)  rotary  converters,  (h)  motor  generator  sets,  or  (c)  static 
transformers  (substation  apparatus),  that  portion  of  the  line  or  outside 
conductor  system  carrying  current  other  than  the  operating  kind  or 
voltage  shall  be  classed  as  transmission  system.  When  the  electric 
current  is  generated  or  received  and  used  substantially  unchanged  in 
voltage  and  kind,  the  line  or  outside  conductor  system,  including  any 
feeders,  trolley  wires,  booster  circuits,  and  supplementary  return,  shall 
be  classed  wholly  as  distribution  system.  Tie  lines  between  generating 
stations  and  substations  should  follow  the  same  rule  as  other  lines. 

258.  POWER    TRANSMISSION    SYSTEMS— DEPRECIA- 

TION. 
This  account  shall  include  charges  covering  the  current  loss 
from  depreciation  of  power  transmission  lines.     (See  special 
instructions,  section  8.) 


312  APPENDIX  B 

259.  POWER  DISTRIBUTION  SYSTEMS. 

This  account  shall  include  the  cost  of  repairing  electric  dis- 
tribution systems,  whether  overhead,  surface,  or  underground, 
for  conveying  low-tension  power  for  propelling  trains  and  cars, 
and  for  power,  heat,  light,  and  general  purposes. 

(Note  carefully  special  instructions,  sections  2  and  3.) 

DETAILS   OP   POWEB   DI8TBIBUTION   SYSTEMS 

(See  special  instructions,  section  22) 

Compressed-air  pipe  lines.  Span  wires. 

Cut-outs  (not  at  power  houses  and  Steam  pipe  lines. 

substations) .  Switchboards  (not  at  power  houses 
Feed  wires.  and  substations). 

Guard  wires.  Third  rail. 

Insulators  and  connections.  Third-rail  braces. 

Overhead  trolley  wires.  Third-rail  insulation  and  protec- 
Rail  bond  plugs.  tion. 

Rail  bonds.  Third-rail  supports. 
Rail  insulating  devices. 

Note  A. — The  cost  of  repairing  and  replacing  track  material,  such  as 
insulated  rail  splices,  used  in  connection  with  electric  distribution  sys- 
tems, shall  be  charged  to  account  No.  216,  "Other  track  material." 

Note  B. — The  cost  of  repairing  that  portion  of  distribution  systems 
located  in  shop  buildings  and  station  and  office  buildings  shall  be  included 
in  the  cost  of  repairing  the  buildings.  The  cost  of  repairing  distribution 
systems  in  plants  used  exclusively  for  operating  signals  and  interlockers 
shall  be  included  in  account  No.  249,  "Signals  and  interlockers." 

Note  C. — When  the  electric  current  generated  or  received  is  changed 
by  means  of  (a)  rotary  converters,  (b)  motor  generator  sets,  or  (c)  static 
transformers  (substation  apparatus),  that  portion  of  the  line  or  outside 
conductor  system  carrying  current  other  than  the  operating  kind  or 
voltage  shall  be  classed  as  transmission  system.  When  the  electric 
current  is  generated  or  received  and  used  substantially  unchanged  in 
voltage  and  kind,  the  line  or  outside  conductor  system,  including  any 
feeders,  trolley  wires,  booster  circuits,  and  supplementary  return,  shall 
be  classed  wholly  as  distribution  system.  Tie  lines  between  generating 
stations  and  substations  should  follow  the  same  rule  as  other  lines. 

260.  POWER    DISTRIBUTION    SYSTEMS— DEPRECIA- 

TION. 

This  account  shall  include  charges  covering  the  current  loss 
from  depreciation  of  power  distribution  systems.  (See  special 
instructions,  section  8.) 

261.  POWER  LINE  POLES  AND  FIXTURES. 

This  account  shall  include  the  cost  of  repairing  and  replacing 
electric  line  poles,  cross  arms,  and  insulating  pins;  brackets  and 


APPENDIX  B  813 

other  pole  fixtures;  and  braces  and  other  supports  for  holding 
poles  in  position;  also  the  cost  of  repairing  structures  primarily 
for  supporting  the  overhead  electric  construction. 
(Note  carefully  special  instructions,  sections  2  and  3.) 

262.  POWER  LINE  POLES  AND  FIXTURES— DEPRE- 

CIATION. 
This  account  shall  include  charges  covering  the  current  loss 
from  depreciation  of  power  line  poles  and  fixtures.    (See  special 
instructions,  section  8.) 

263.  UNDERGROUND  CONDUITS. 

This  account  shall  include  the  cost  of  repairing  conduits  re- 
quired for  underground  electric  wires  and  cables  of  electric  rail- 
way construction,  including  manholes,  sewer  connections, 
sewer  traps,  and  all  other  material  necessary  for  the  maintenance 
of  the  conduit  system. 

(Note  carefully  special  instructions,  sections  2  and  3.) 

264.  UNDERGROUND  CONDUITS— DEPRECIATION. 
This  account  shall  include  charges  covering  the  current  loss 

from  depreciation  of  underground  conduits.     (See  special  in- 
structions, section  8.) 

265.  MISCELLANEOUS  STRUCTURES. 

This  account  shall  include  the  cost  of  repairing  permanent 
structures,  not  provided  for  elsewhere,  including  the  cost  of 
repairing  all  furniture  and  fixtures  to  equip  them  for  use.  It 
shall  also  include  the  cost  of  maintenance  of  the  grounds  ap- 
purtenant to  such  structures. 

(Note  carefully  special  instructions,  sections  2  and  3.) 

Note  A. — When  separable  the  cost  of  maintaining  structures  which  are 
rented  to  other  companies  or  individuals  shall  be  charged  to  the  income 
account  in  which  is  included  the  rent  received  for  use  of  the  structures. 

NoTB  B. — Incidental  cleaning,  including  the  cost  of  cleaning  snow 
from  roofs,  when  done  by  employees  regularly  working  in  miscellaneous 
buildings,  shall  not  be  included  in  this  account. 

266.  MISCELLANEOUS  STRUCTURES— DEPRECIATION. 

This  account  shall  include  charges  covering  the  current  loss 
from  depreciation  of  miscellaneous  structures.  (See  special 
instructions,  section  8.) 


S14  APPENDIX  B 

267.  PAVING. 

This  account  shall  include  the  cost  of  repairing  paving  about 
tracks  in  public  highways  and  streets  through  which  the  carrier's 
tracks  are  laid. 

(Note  carefully  special  instructions,  sections  2  and  3.) 

Note. — The  cost  of  repairing  paving  upon  the  carrier's  lands,  within 
the  grounds  of  buildings  or  other  structures,  shall  be  included  in  the  ac- 
counts provided  for  the  repairs  of  the  structures,  and  the  cost  of  repair- 
ing paving  upon  the  carrier's  right  of  way  at  crossings  in  account  No.  225. 
"Crossings  and  signs." 

268.  PAVING— DEPRECIATION. 

This  account  shall  include  charges  covering  the  current  loss 
from  depreciation  of  paving.    (See  special  instructions,  section  8.) 

269.  ROADWAY  MACHINES. 

This  account  shall  include  the  cost  of  repairing  roadway  ma- 
chines which  are  used  for  the  repairs  of  roadway  and  structures. 
(Note  carefully  special  instructions,  sections  2  and  3.) 

LIST    OF    HOADWAY    MACHINES 

(See  special  instructions,  section  22) 

Boilers,  portable.  Grading  outfits. 

Cars,  hand.  Hydraulic  outfits. 

Cars,  lever.  Jacks,  hydraulic. 

Cars,  motor  inspection.  Log  loaders. 

Cars,  push.  Pile  drivers. 
Cars   (small),    crane,   for  supply-       Plows,  unloading. 

yards  and  general  use.  Rail  unloaders. 

Concrete  mixers.  Rock  crushers. 

Ditching  machines.  Steam  rollers. 

Dredging  machines.  Timber  trucks. 

Engines,  portable.  Velocipedes. 

Note  A. — The  cost  of  repairing  machines  in  the  maintenance  of  equip- 
ment shops  shall  be  included  in  account  No.  302,  "Shop  machinery,"  as 
provided  for  therein. 

Note  B. — The  cost  of  repairing  roadway  machines,  such  as  pile 
drivers,  log  loaders,  hoisting  engines,  and  concrete  mixers,  when  per- 
manently mounted  for  movement  on  carrier's  tracks,  shall  be  included 
in  account  No.  326,  "Work  equipment — Repairs." 

270.  ROADWAY  MACHINES— DEPRECIATION. 

This  account  shall  include  charges  covering  the  current  loss 
from  depreciation  of  roadway  machines.  (See  special  instruc- 
tions, section  8.) 


APPENDIX  B 


315 


271.  SMALL  TOOLS  AND  SUPPLIES. 

This  account  shall  include: 

Roadway  and  Track  Tools. — The  cost  of  roadway  tools 
(except  special  tools  provided  for  elsewhere),  including  the  cost 
of  repairing  such  tools. 

(Note  carefully  special  instructions,  sections  2  and  3.) 


LIST   OF   ROADWAY  AND   TRACK   TOOLS 


(See  special  instructions,  section  22) 


Adzes. 

Anvils. 

Augers. 

Axes. 

Ballast  forks. 

Bars,  claw. 

Bars,  crow. 

Bars,  lining. 

Bars,  pinch. 

Bars,  raising. 

Bars,  tamping. 

Braces  and  bits. 

Brooms. 

Brush  hooks. 

Cable  stretchers. 

Cables. 

Cans,  oil. 

Cans,  water. 

Cant  hooks. 

Chains. 

Chisels,  track. 

Chisels,  wood. 

Curbing  hooks. 

Dippers. 

Drawing  knives. 

Drill  bits. 

Drills  (portable). 

Flags,  signal. 

Furnaces  (portable). 

Grindstones. 

Hammers,  napping. 

Hammers,  paving. 

Hammers,  spiking. 

Handles  for  tools. 

Hatchets. 

Hoes. 

Jack  levers. 

Jacks,  ratchet. 

Jacks,  screw. 

Jacks,,  track. 


Kegs,  water. 

Ladders. 

Lanterns  and  fixtures. 

Lawn  mowers. 

Levels. 

Lines  for  ditching. 

Nippers. 

Oilstones. 

Padlocks, 

Pails,  water. 

Paint  brushes. 

Picks,  clay. 

Picks,  tamping. 

Pike  poles. 

Post-hole  diggers. 

Post-hole  tampers. 

Punches. 

Rail  benders. 

Rail  tongs. 

Rakes. 

Rope. 

Saws,  crosscut. 

Saws,  hand. 

Scrap  boxes. 

Scjrthes. 

Shovels. 

Sickles. 


Spike  mauls. 

Spike  pullers. 

Spot  boards. 

Squares. 

Straightening  machines. 

Tape  lines. 

Thermometers  for  laying  rail. 

Tongs. 

Tool  boxes. 

Torches. 

Track  gauges. 


316  APPENDIX  B 

Track  levelg.  Whetstones. 

Vises.  Wood  mallets. 

Weed  spuds.  Wrenches,  monkey. 

Wheelbarrows.  Wrenches,  track. 

Roadway  and  Track  Supplies. — The  cost  of  supplies  con- 
sumed in  connection  with  the  operation  of  roadway  machines 
while  used  in  repairs  of  roadway  and  tracks;  and  cost  of  supplies 
used  by  trackwalkers,  track  watchmen,  and  roadway  and  track 
repair  men. 

ITEMS   OF   ROADWAY   SUPPLIES 

(See  special  instructions,  section  22) 

Alcohol  for  hydraulic  jacks. 

Fuel  for  heating  tool  and  other  section  houses. 

Fuel  for  portable  forges  used  in  roadway  and  track  work. 

Gasoline  for  motor  cars. 

Oatmeal  and  ice  for  drinking  water  used  by  roadway  and  track  repair 
men. 

Oil  and  waste  for  hand  cars,  lever  cars,  motor  inspection  cars,  and  push 
cars. 

Oil  and  wicks  for  lanterns  used  by  trackwalkers,  track  watchmen,  and 
roadway  and  track  repair  men. 

Oil  and  wicks  for  lighting  tool  and  other  section  houses. 

Torpedoes  used  by  trackwalkers,  track  watchmen,  and  roadway  and 
track  repair  men. 

Water  for  section  houses. 

272.  REMOVING  SNOW,  ICE,  AND  SAND. 

This  account  shall  include  the  cost  of  keeping  track  and  road- 
way clear  of  snow,  ice,  and  sand. 

It  shall  include  cost  of  preventing  accumulation,  such  as  the 
cost  of  distributing,  setting  up,  inspecting,  taking  down,  and 
regathering  portable  snow  and  sand  fences;  and  cost  of  tools 
furnished  for  the  purpose;  also  cost  of  storing  fences. 

It  shall  include  cost  of  removing  accumulations  of  snow,  ice, 
and  sand,  cost  of  snow-plow  and  Sanger  service,  and  of  work- 
train  service;  cost  of  applying  and  removing  flangers  from  loco- 
motives and  cars,  and  of  slatting  pilots;  cost  of  salt  to  keep 
switches  clear;  and  cost  of  meals  and  lodging  for  men  employed 
in  removal  service. 

(Note  carefully  special  instructions,  sections  2  and  3.) 

273.  ASSESSMENTS  FOR  PUBLIC  IMPROVEMENTS. 
This  account  shall  include  the  carrier's  proportion  of  the  cost 

of  repairing  public  improvements,  such  as  sewers,  curbs,  gutters. 


APPENDIX  B  S17 

pavement  and  sidewalks,  including  costs  of  such  repairs  made 
under  Government  regulations  by  the  carrier's  own  employees. 
(Note  carefully  special  instructions,  sections  2  and  3.) 

Note. — The  cost  of  repairs,  required  by  Government  authority,  to 
paving  between  rails  and  adjacent  to  tracks  laid  through  public  highways 
shall  be  included  in  account  No.  267,  "Paving." 

274.  INJURIES  TO  PERSONS. 

This  account  shall  include  expenses  on  account  of  injuries  to 
persons  which  occur  directly  in  connection  with  the  maintenance 
of  way  and  structures,  including  injuries  occurring  in  connec- 
tion with  the  operation  of  work  trains  in  such  service,  and  in- 
juries caused  by  defective  highways  within  the  right  of  way. 

It  shall  also  include  expenses  on  account  of  injuries  to  em- 
ployees incurred  while  demolishing  structures,  the  maintenance 
of  which  would  be  chargeable  to  Maintenance  of  Way  and 
Structures;  services  of  employees  and  others  called  in  consulta- 
tion in  connection  with  claim  adjustments;  pay  and  expenses 
of  employees  while  engaged  as  witnesses  at  inquests  and  law- 
suits; and  a  suitable  proportion  of  donations  made  to  hospitals. 

ITEMS   OF   EXPENSE 

(See  special  instructions,  section  22) 

Artificial  limbs.  Medical  and  surgical  services. 

Carriage  fees.  Medical  and  surgical  supplies. 

Claim  adjusters'  and  clerks'  ser-  Notarial  fees. 

vices.  Nursing. 

Claim  adjusters'  oflSce  expenses.  Railway  transportation. 

Compensation  for  injuries  or  death.  Undertakers'  services. 

Final  judgments,  including  plain-  Undertakers'  supplies. 

tiffs'  court  costs.  Witnesses'  fees  and  expenses  at  in- 
Funeral  expenses.  quests  and  law-suits. 
Hospital  attendance. 

Note  A. — Expenses  incident  to  personal  injury  suits,  not  otherwise 
provided  for,  shall  be  included  in  account  No.  454,  "Law  expenses." 

Note  B. — Amounts  donated  by  a  carrier  to  hospitals  shall  be  distrib- 
uted, 25  per  cent  to  account  No.  274,  "Injuries  to  persons";  25  per 
cent  to  account  No.  332,  "Injuries  to  persons";  and  50  per  cent  to  ac- 
count No.  420,  "Injuries  to  persons." 

Note  C. — The  pay,  office  rent,  office  expenses,  and  other  expenses 
of  claim  adjusters,  claim  clerks  and  others  in  charge  of  or  engaged  in 
connection  with  claim  cases,  when  not  assignable  to  a  distinct  class  of 
claims,  shall  be  apportioned  equally  among  the  several  classes  of  claims 
over  which  they  have  jurisdiction  or  in  connection  with  which  they 
are  engaged. 


318  APPENDIX  B 

275.  INSURANCE. 

This  account  shall  include  premiiuns,  except  reinsurance 
premiums,  for  insuring  the  carrier  against  loss  through  injuries 
to  persons  or  damage  to  or  destruction  or  loss  of  property, 
whether  caused  by  fire,  accident,  or  other  cause,  when  such  loss 
to  the  carrier  would  be  chargeable  to  Maintenance  of  Way  and 
Structures;  also  premiums  on  fidelity  bonds  of  employees  whose 
pay  is  chargeable  to  Maintenance  of  Way  and  Structures. 
(See  special  instructions,  section  18.) 

Note. — The  premiums  paid  by  the  carrier  to  its  insurance  fund  shall 
be  credited  to  an  insurance  reserve  account,  to  which  account  shall  be 
charged  the  amount  of  all  claims  for  injuries  to  persons  and  damages 
to  the  property  covered  by  its  insurance.  To  such  account  shall  also  be 
charged  all  reinsurance  premiums  paid  to  insurance  companies,  and  to 
it  shall  be  credited  all  amounts  recovered  from  insurance  companies  in 
reimbursement  for  losses  under  such  reinsurance. 

276.  STATIONERY  AND  PRINTING. 

This  account  shall  include  the  cost  of  stationery  and  printing 
used  in  connection  with  maintenance  of  way  and  structures. 

STATIONERY   AND   PRINTING   ITEMS 

(See  special  instructions,  section  22) 

Adding  machines.  Dictaphones. 

Addressographs  and  supplies.  •  Dictographs. 

Arm  rests.  Drawing  paper. 

Binders.  DupUcators. 

Blank  books.  Electric  pens. 

Blotters.  Envelopes. 

Blotting  paper.  Erasers,  rubber  and  steel. 

Bristol  board.  Eyelet  punches. 

Calculating  machines.  Eyelets. 

Calendars.  File  boxes,  paper. 

Carbon  paper.  Forms,  blank  and  printed. 

Cardboard.  Glass  pens. 

Cards,  blank  and  printed.  Hectographs. 

Circulars.  Indexes. 

Computing  tables.  Ink  for  writing  and  drawing. 

Copy  (impression)  books.  Inkstands. 

Copying  brushes.  Invoice  books. 

Copying  presses.  Legal  cap  paper. 

Crayons.  Letter  paper. 

Cross-section  books.  Manifold  paper. 

Cross-section  paper  Manifold  pens. 

Cyclostyles.  Mimeographs. 

Dating  stamps  and  ribbons.  Mucilage, 


APPENDIX  B 


319 


Mucilage  brushes. 

Neostyles. 
Note  paper. 
Notices. 

Numbering  stamps. 
Oil  paper. 
Paper. 

Paper  baskets. 
Paper  clips. 
Paper  cutters. 
Paper  fasteners. 
Paper  files. 
Paper  weights. 
Papyrographs. 
Pencil  sharpeners. 
Pencils  for  writing  and  drawing. 
Penholders. 
Penracks. 

Pens  for  writing  and  drawing. 
Phonographs  and  records. 
Pins. 
Postage. 

Profile  books  and  paper. 
Punches  (not  conductors'  or  bag- 
gagemen's). 
Rubber  bands. 
Rubber  stamps. 

Note. — The  cost  of  dictionaries,  periodicals,  technical  books,  etc., 
shall  be  included  in  the  appropriate  superintendence  accounts. 

277.  OTHER  EXPENSES. 

This  account  shall  include  all  expenses  in  connection  with 
maintenance  of  way  and  structures  not  provided  for  elsewhere. 


Rulers. 

Ruling  pens. 

Scrapbooks. 

Sealing  wax. 

Seals. 

Shears. 

Shipping  tags. 

Shorthand  notebooks. 

Sponge  cups. 

Sponges. 

Stamps,  impression. 

Stylographs. 

Tablets,  blank  and  printed. 

Tape. 

Telegraph  blanks. 

Tissue  (impression)  paper. 

Tracing  cloth. 

Tracing  paper. 

Twine. 

Typewriters  and  ribbons. 

Wage  tables. 

Wastebaskets. 

Water  colors. 

Water  holders. 

Wrapping  paper. 

Wringers  for  copying  presses. 


ITEMS   OF  EXPENSE 

(See  special  instructions,  section  22) 

Pay  and  expenses  of  maintenance  of  way  employees  attending  con- 
ferences with  officers  in  connection  with  wage  disputes. 

Fees  paid  arbitrators  in  wage  disputes  with  maintenance  of  war  em- 
ployees. 

Payments  to  maintenance  of  way  employees  for  time  absent  on  ac- 
count of  sickness,  when  not  compensation  for  personal  injuries. 

Gratuities  paid  to  persons  for  discovering  defective  rails,  etc. 

278.   MAINTAINING    JOINT    TRACKS,    YARDS,    AND 
OTHER  FACILITIES— DR. 

This  account  shall  include  the  carrier's  proportion  of  the  costs 
incurred  by  others  in  maintaining  joint  tracks,  yards,  terminals, 
and  other  facilities. 


820  APPENDIX  B 

Note. — The  purpose  of  this  account  is  to  show  the  amounts  accruing 
against  the  carrier  for  its  proportion  of  the  cost  of  maintaining  tracks, 
yards,  and  other  roadway  and  structure  facilities  maintained  by  others 
and  in  the  joint  use  of  which  the  carrier  participates.  (See  special  in- 
structions, section  9.) 

279.  MAINTAINING    JOINT    TRACKS,    YARDS,    AND 
OTHER  FACILITIES— CR. 
This  account  shall  include  amounts  chargeable  to  others  as 
their  proportions  of  the  cost  incurred  by  the  carrier  in  main- 
taining joint  tracks,  yards,  terminals,  and  other  facilities. 

Note. — The  purpose  of  this  account  is  to  show  the  amounts  accruing 
in  favor  of  the  carrier  and  against  others  for  their  proportions  of  the  cost 
of  maintaining  tracks,  yards,  and  other  roadway  and  structure  facilities 
maintained  by  the  carrier  and  in  the  joint  use  of  which  others  participate. 
(See  special  instructions,  section  9.) 

n.  MAINTENANCE  OF  EQUIPMENT. 

The  primary  accounts  included  in  this  general  account  are 
designed  to  show  the  expenses  of  maintaining  the  carrier's  equip- 
ment and  the  carrier's  expense  for  the  repairs  of  other  equip- 
ment used  in  its  operations,  also  the  cost  of  maintaining  the 
fixed  improvements  which  are  classified  as  shop  and  power 
plant  machinery,  and  power  substation  apparatus.  The  repair 
accounts  shall  include  foreign  roads'  freight  charges  for  trans- 
porting the  carrier's  equipment  to  shops  for  repairs  and  for 
transporting  such  equipment  to  the  carrier's  line  after  repairs 
have  been  made.  No  charge  shall  be  made  to  these  accounts 
for  transporting  equipment  in  the  carrier's  transportation  serv- 
ice trains  to  shops  for  repairs  or  from  shops  after  repairs  have 
been  made. 

The  accounts  for  maintenance  of  equipment  shall  be  kept  in 
such  manner  as  to  show  separately,  by  primary  accounts,  the 
expenses  directly  assignable  to  sleeping-car  operations,  water- 
line  operations,  dining  and  buffet  service,  producing  power  sold, 
and  other  miscellaneous  operations. 

301.  SUPERINTENDENCE. 

This  account  shall  include: 

Pay  of  Officers. — ^The  pay  of  officers  directly  in  charge  of 
or  engaged  in  the  maintenance  of  equipment. 


APPENDIX  B  321 

LIST   OP   OFFICERS 

(See  special  instructions,  section  22) 

Vice  president.  General  equipment  inspector. 

Assistant  vice  president.  Engineer  of  tests. 

General  superintendent  of  motive  Supervisor  of  car  department. 

power.  Electrical  engineer. 

Assistant   general   superintendent  Assistant  electrical  engineer. 

of  motive  power.  Chemist  and  assistant  chemist. 

Mechanical  superintendent.  Master  car  builder. 

Superintendent  of  motive  power.  Master  mechanic. 

Assistant  superintendent  of  motive  General  foreman. 

power.  Chief  car  inspector. 

Mechanical  engineer.  Inspector  of  passenger-train  cars. 

Assistant  mechanical  engineer.  General  car  inspector. 

Chief  chemist.  Traveling  boiler  inspector. 

Pay  op  Clerks  and  Attendants. — The  pay  of  clerks  and 
other  employees  in  the  offices  and  on  business  cars  of  officers 
whose  pay  is  chargeable  to  this  account. 

LIST   OF   EMPLOYEES 

(See  special  instructions,  section  22) 
Chief  motive  power  clerks.  Shop  clerks. 

Chief  clerks.  Messengers. 

Draftsmen.  Cooks. 

Stenographers.  Porters. 

Motive  power  clerks. 

Office  and  Other  Expenses. — Office  expenses  and  other 
expenses  of  officers  and  employees  whose  pay  is  chargeable  to 
this  account,  and  amounts  paid  to  detective  agencies  and  others 
for  investigations  in  connection  with  repairs  of  equipment. 

ITEMS   OP   EXPENSE    AND   SUPPLIES 

(See  special  instructions,  section  22) 

Atlases  and  maps.  Lighting. 

Barometers.  Official  train  service. 

Books  for  office  use.  Periodicals  and  newspapers. 

Business  car  service.  Power. 

Drafting  instruments.  Provisions  for  business  cars. 

Drafting  supplies.  Rent  of  offices. 

Engineering  supplies.  Repair  of  rented  offices. 

Fees  and  dues  in  technical  associa-  Telegraph  service, 

tions.  Telephone  service. 

Furniture  repairs  and  renewals.  Traveling  expenses. 

Heating.  Water  and  ice. 

Note  A. — When  employees  designated  above  are  engaged  on  con- 
struction or  other  work  not  chargeable  to  Maintenance  of  Equipment, 


322  APPENDIX  B 

their  pay  and  expenses  while  thus  employed  shall  be  charged  to  accounts 
covering  the  specific  work  on  which  engaged. 

Note  B. — When  oflBcers  designated  above  have  supervision  over  more 
than  one  department,  their  salaries,  the  pay  of  their  clerks  and  attend- 
ants, and  their  office  and  other  expenses  shall  be  apportioned  equally 
among  the  departments  over  which  they  have  jurisdiction. 

Note  C. — The  cost  of  stationery  purchased  for  maintenance  of  equip- 
ment offices  is  chargeable  to  account  No.  334,  "Stationerj^  and  printing," 

Note  D. — The  pay  of  general  foremen  in  small  shops,  who  exercise 
direct  supervision  over  all  departments,  unassisted  by  departmental  fore- 
men, shall  be  apportioned  through  clearing  account  "Shop  expenses." 

302.  SHOP  MACHINERY. 

This  account  shall  include  the  cost  of  repairing  machinery 
and  other  apparatus,  including  special  foundations,  in  shops 
and  enginehouses. 

(Note  carefully  special  instructions,  sections  2  and  3.) 

list  op  shop  machinery 

(See  special  instructions,  section  22) 

Air  compressors.  Metal  chimneys. 

Ash  conveyors.  Milling  machines. 

Belting,  Motors. 

Blowers.  Pipe  cutting  and  threading  ma- 
Boilers  for  furnishing  power.  chines. 

Boring  machines.  Planers. 

Cars,  small  motor.  Pneumatic  hammers. 

Cars,  push.  Power  machinery,  where  no  dis- 
Cranes.  tinct  power  plant  is  provided. 

Drill  presses.  Punches. 

Drilling  machines.  Riveters. 

Drop  tables.  Saws. 

Forges.  Shafting. 

Framing  machines.  Shapers. 

Furnaces.  Blotters. 
Grinding  and  polishing  machines.       Stationary  engines. 

Hoists.  Steam  hammers. 

Hydraulic  jacks.  Vises. 

Lathes.  Welding  machines. 

Lifting  magnets.  Woodworking  machines. 

Note  A. — The  cost  of  repairing  power  plant  machinery  for  shop 
power  when  located  in  distinct  buildings  shall  be  included  in  account 
No.  304,  "Power  plant  machinery." 

Note  B. — The  cost  of  repairing  boilers  used  exclusively  for  heating 
shall  be  included  in  the  appropriate  repair  accounts  for  buildings. 

Note  C. — The  cost  of  small  tools  which  are  soon  worn  out,  when 
used  by  mechanics  on  miscellaneous  work,  shall  be  included  in  clearing 
account  "Shop  expenses,"  and  when  used  on  repairs  of  equipment  shall 
be  included  in  the  appropriate  accounts  for  repairs  of  equipment. 


APPENDIX  B  323 

Note  D. — The  cost  of  repairing  machinery  and  tools  in  shops  used 
exclusively  for  maintenance  of  way  and  structures  shall  be  included  in 
account  No.  229,  "Roadway  buildings." 

303.  SHOP  MACHINERY— DEPRECIATION. 

This  account  shall  include  charges  covering  the  current  loss 
from  depreciation  of  shop  naachinery.  (See  special  instructions, 
section  8.) 

304.  POWER  PLANT  MACHINERY. 

This  account  shall  include  the  cost  of  repairing  machinery 
and  other  apparatus,  including  special  foundations,  for  generat- 
ing power  in  power  plants  used  for  the  operation  of  trains  and 
cars  and  to  furnish  power,  heat,  and  light  for  general  purposes. 
It  shall  also  include  the  cost  of  repairing  machinery  and  other 
apparatus  for  transforming  and  storing  power,  when  such  ap- 
paratus is  contained  in  a  power  plant. 

(Note  carefully  special  instructions,  sections  2  and  3.) 

DETAILS   OF   POWER   PIiANT  MACHINERY 

(See  special  instructions,  section  22) 
Ammeters.  Insulators. 
Batteries.  Lamps. 
Belting.  Lighting  apparatus. 
Boiler-room  appliances  and  tools.         Lubricating  devices. 
Boilers  and  fittings.  Mechanical  stokers. 
Boosters.  Piping.                                  ^_^ 
Cables.  Poles.                                   ^^^ 
Circuit  breakers.  Pumps. 
Clutches.  Purifiers. 
Conductors.  Rheostats. 
Cranes.  Sewer  connections. 
Draft  machinery.  Shafting. 
Dynamos.  Stationary  engines. 
Economizers.  Steam  distribution  systems. 
Electric-power    distribution  sys-       Steam  fittings, 
terns,  interior.  Switchboards. 
Engine-room  appliances  and  tools.       Tanks. 
Feed-water  heaters.  Transformers. 
Furnaces.  Turbines. 
Generators.  Voltmeters. 
Globes.  Water  meters. 
Hangers.  Water  wheels. 
Heating  apparatus.  Wires  from  generators  or  trans- 
Hoists,  formers  to  switchboards. 

Note  A. — The  cost  of  repairing  power  apparatus  in  shops  where  no 
distinct  plant  is  provided  shall  be  included  in  account  No.  302,  "Shop 
machinery." 


SU  APPENDIX  B 

Note  B. — The  cost  of  repairing  power  apparatus  in  stations  and  of- 
fices used  solely  for  station  and  oflBce  purposes,  where  no  distinct  plant 
is  provided,  shall  be  included  in  account  No.  227,  "Station  and  office 
buildings." 

Note  C. — The  cost  of  repairing  power  apparatus  in  plants  used  solely 
for  operating  signals  and  interlockers  shall  be  included  in  account  No.  249, 
"Signals  and  interlockers." 

305.  POWER  PLANT  MACHINERY— DEPRECIATION. 
This  account  shall  include  charges  covering  the  current  loss 

from  depreciation  of  power  plant  machinery.     (See  special  in- 
structions, section  8.) 

306.  POWER  SUBSTATION  APPARATUS. 

This  account  shall  include  the  cost  of  repairing  machinery 
and  other  apparatus,  including  special  foundations,  for  trans- 
forming or  storing  power  in  power  substations  used  for  the 
operations  of  trains  and  cars  and  for  power,  heat,  and  light  for 
general  purposes. 

(Note  carefully  special  instructions,  sections  2  and  3.) 

DETAILS   OF   POWER   SUBSTATION   APPARATUS 

(See  special  instructions,  section  22) 

Rotary  converters.  Switchboards. 

Storage  batteries.  Transformers. 

Note. — When  machinery  and  other  apparatus  for  transforming  and 
storing  power  are  located  in  a  power  plant  the  cost  of  repairs  shall  be 
included  in  account  No.  304,  "Power  plant  machinery." 

307.  POWER    SUBSTATION    APPARATUS— DEPRECIA- 

TION. 
This  account  shall  include  charges  covermg  the  current  loss 
from  depreciation  of  power  substation  apparatus.    (See  special 
instructions,  section  8.) 

308.  STEAM  LOCOMOTIVES— REPAIRS. 

This  account  shall  include  the  cost  of  repairing  transportation 
service  steam  locomotives  and  tenders,  including  all  appur- 
tenances, and  the  cost  of  small  hand  tools  used  in  repair  work. 

This  account  shall  also  include  the  cost  of  work-train  service 
for  the  transportation  of  locomotives  without  steam  to  shops  for 
repairs,  including  the  pay  and  expenses  of  caretakers,  and  the 
pay  and  expenses  of  caretakers  of  locomotives  without  steam 


APPENDIX  B  325 

which  are  hauled  in  transportation  service  trains  to  shops  for 
repairs;  also  notarial  fees  in  connection  with  reports  on  condi- 
tions of  locomotives. 

(Note  carefully  special  instructions,  sections  2  and  3,  and 
general  instructions  for  income,  profit  and  loss,  and  general 
balance-sheet  accounts,  section  2.) 

LIST  OF  APPURTENANCES   TO    LOCOMOTIVE3 

(See  special  instructions,  section  22) 

Air-brake  equipment  and  hose.  Head  lamps. 

Ann  rests.  Packing  (except  for  lubricating). 

Awnings.  Pneumatic  sanding  equipment. 

Brake  fixtures.  Seat  boxes. 

Cab  cushions.  Speed  recorders. 

Cab  lamps.  Steam-gauge  lamps. 

Clocks.  Steam-heat  equipment  and  hose. 

Coal  boards.  Storm  doors. 

Fire  extinguishing  apparatus.  Tool  boxes. 

Gongs.  Train-signal  equipment  and  hose. 

Note  A. — The  cost  of  inspecting  smokestacks  and  ash  pans  of  locomo- 
tives in  service  shall  be  included  in  the  appropriate  enginehouse  expense 
accounts. 

Note  B. — The  cost  of  repairing  steam  locomotives  and  tenders  of 
foreign  lines,  waybilled  as  freight,  and  damaged  in  transit  shall  be 
charged  to  account  No.  418,  "Loss  and  damage — Freight";  and  the 
cost  of  repairing  steam  locomotives  and  tenders  of  foreign  lines  having 
trackage  rights  over  the  carrier's  line,  damaged  by  collision,  wreck,  or 
other  cause,  for  which  the  carrier  is  liable,  shall  be  charged  to  account 
No.  416,  "Damage  to  property." 

Note  C. — The  cost  of  running  locomotives  under  steam  to  shops  for 
repairs  in  connection  with  transportation  service  shall  be  included  in 
the  cost  of  the  service  in  connection  with  which  the  movement  occurs. 

Note. — The  cost  of  repairing  steam  locomotives  used  solely  in  work 
service  in  connection  with  operations  shall  be  included  in  account 
No.  326,  "Work  equipment — Repairs."  The  cost  of  repairing  locomo- 
tives on  account  of  construction  work  shall  be  included  in  the  cost  of  the 
work.  (See  general  instructions  for  the  classification  of  investment  in 
road  and  equipment,  section  4c.) 

309.  STEAM  LOCOMOTIVES— DEPRECIATION. 

This  account  shall  include  uniform  monthly  charges  represent- 
ing the  depreciation  of  steam  locomotives.  These  charges  shall 
be  based  upon  the  percentage  of  the  original  cost  (estimated  if 
not  known),  ledger  value,  or  purchase  price  of  such  equipment 
determined  to  be  equitable  from  the  carrier's  experience  and 
best  sources  of  information  as  to  the  average  current  loss  from 


'326  APPENDIX  B 

depreciation.  A  statement  of  the  percentages  used  by  the 
carrier  for  computing  these  charges,  together  with  the  estimated 
life  of  the  equipment  upon  which  such  percentages  are  based, 
shall  be  included  in  its  annual  report  to  the  Commission. 

Depreciation  charges  with  respect  to  any  locomotive  shall 
cease  when  the  difference  between  the  ledger  value  and  the  esti- 
mated scrap  value  shall  have  been  credited  to  the  accrued  de- 
preciation account. 

(See  general  instructions  for  income,  profit  and  loss,  and 
general  balance-sheet  accounts,  section  2.) 

Note, — All  charges  to  this  account  for  depreciation  of  the  carrier's 
equipment  shall  be  concurrently  credited  to  balance-sheet  account 
No.  776  "Accrued  depreciation — Equipment." 

310.  STEAM  LOCOMOTIVES— RETIREMENTS. 

This  account  shall  include  amounts  necessary  to  adjust  the 
difference  between  the  ledger  value  (less  salvage)  of  steam  loco- 
motives retired  from  service  and  the  amount  of  accrued  deprecia- 
tion charged  on  account  of  such  retired  locomotives  to  the  date 
of  their  retirement.  (See  road  and  equipment  account  II,  Equip- 
ment, paragraphs  4  and  5.) 

Note. — Steam  locomotiv^es  permanently  retired  from  service,  but  held 
pending  disposition,  shall  be  written  out  of  service  and  carried  in  an 
appropriate  suspense  account  at  an  equitable  valuation. 

311.  OTHER  LOCOMOTIVES— REPAIRS. 

This  account  shall  include  the  cost  of  repairs  of  transportation 
service  locomotives  other  than  steam  locomotives,  analogous 
to  those  set  forth  for  steam  locomotives  in  account  No.  308, 
"Steam  locomotives — Repairs." 

(Note  carefully  special  instructions,  sections  2  and  3.) 

312.  OTHER  LOCOMOTIVES— DEPRECIATION. 

This  account  shall  include  uniform  monthly  charges  repre- 
senting the  depreciation  of  other  than  steam  locomotives.  These 
charges  shall  be  based  upon  the  percentage  of  the  original  cost 
(estimated  if  not  known),  ledger  value,  or  purchase  price  of  such 
equipment  determined  to  be  equitable  from  the  carrier's  ex- 
perience and  best  sources  of  information  as  to  the  average  cur- 
rent loss  from  depreciation.    A  statement  of  the  percentages 


APPENDIX  B  327 

used  by  the  carrier  for  computing  these  charges,  together  with 
the  estimated  life  of  the  equipment  upon  which  such  percentages 
are  based,  shall  be  included  in  its  annual  report  to  the  Com- 
mission. 

Depreciation  charges  with  respect  to  any  locomotive  shall 
cease  when  the  difference  between  the  ledger  value  and  the 
estimated  scrap  value  shall  have  been  credited  to  the  accrued 
depreciation  account. 

Note. — All  charges  to  this  account  for  depreciation  of  the  carrier's 
equipment  shall  be  concurrently  credited  to  balance-sheet  account 
No.  776,  "Accrued  depreciation — Equipment." 

313.  OTHER  LOCOMOTIVES— RETIREMENTS. 

This  account  shall  include  amounts  necessary  to  adjust  the 
difference  between  the  ledger  value  (less  salvage)  of  locomotives 
other  than  steam  locomotives  retired  from  service  and  the 
amount  of  accrued  depreciation  charged  on  account  of  such 
retired  locomotives  to  the  date  of  their  retirement.  (See  road 
and  equipment  account  II,  Equipment,  paragraphs  4  and  5.) 

Note. — Locomotives  permanently  retired  from  service  but  held 
pending  disposition  shall  be  written  out  of  service  and  carried  in  an  ap- 
propriate suspense  account  at  an  equitable  valuation. 

314.  FREIGHT-TRAIN  CARS— REPAIRS. 

This  account  shall  include  the  cost  of  repairing  freight-train 
cars  and  appurtenances,  and  cost  of  repairs  of  the  freight  car 
feature  of  motor  cars  engaged  in  transportation  service;  also 
cost  of  small  hand  tools  used  in  repairs.  This  account  shall 
also  include  the  net  loss  sustained  on  account  of  the  destruction 
of  foreign  freight  cars  in  the  carrier's  transportation  service  and 
amounts  paid  to  others  for  repairs  of  freight  cars  for  which  the 
carrier  is  liable. 

(Note  carefully  special  instructions,  sections  2  and  3,  and 
general  instructions  for  income,  profit  and  loss,  and  general 
balance-sheet  accounts,  section  2.) 


S«8  APPENDIX  B 

LIST   OF   FBEIGHT-TRAIN   CARS 

(See  special  instructions,  section  22) 
Ballast  (commercial).  Hay. 


Lime. 

Box.  Logging. 

Cabin.  Oil  tank. 

Caboose.  Ore. 

Charcoal.  Platform. 

Coal.  Poling. 

Coke.  Poultry. 

Dump  (conmiercial).  Produce. 

Flat.  Rack. 

Fruit.  Refrigerator. 

Furniture.  Stock. 

Gondola.  Tank  (in  commercial  service). 

Gondola  (hopper).  Water  (in  commercial  service). 

Gondola  (long).  Work  (in  commercial  service). 
Gun  truck. 

LIST   OP  APPUBTENANCES   TO    FREIGHT-TRAIN   CARS 

(See  special  instructions,  section  22) 

Air-brake    equipment,     including  Lamps  and  fixtures. 

hose.  Seats. 

Cooking  equipment  and  utensils.  Speed  recorders. 

Cushions.  Train-signal  equipment,  including 
Heating  equipment.  hose. 

Ice  boxes.  Water  tanks. 

Note  A. — The  cost  of  candles,  wicks,  lamp  chimneys,  globes,  and 
shades  for  oil  or  other  lamps  in  freight-train  cars  shall  be  charged  to 
account  No.  402,  "Train  supplies  and  expenses." 

Note  B. — The  cost  of  repairing  freight-train  cars  of  foreign  lines  way- 
billed  as  freight  and  damaged  in  transit  shall  be  charged  to  account 
No.  418,  "Loss  and  damage — Freight";  and  the  cost  of  repairing  freight- 
train  cars  of  foreign  lines  having  trackage  rights  over  the  carrier's  line, 
when  damaged  by  collision,  wreck,  or  other  cause,  for  which  the  carrier 
is  liable,  shall  be  charged  to  account  No.  416,  "Damage  to  property." 

315.  FREIGHT-TRAIN  CARS— DEPRECIATION. 

Tliis  account  shall  include  imiform  monthly  charges  repre- 
senting the  depreciation  of  freight-train  cars.  These  charges 
shall  be  based  upon  the  percentage  of  the  original  cost  (estimated 
if  not  known),  ledger  value,  or  purchase  price  of  such  equip- 
ment detennined  to  be  equitable  from  the  carrier's  experience  and 
best  sources  of  infonnation  as  to  the  average  current  loss  from 
depreciation.  A  statement  of  the  percentages  used  by  the 
carrier  for  computing  these  charges,  together  with  the  estimated 


APPENDIX  B  329 

life  of  the  equipment  upon  which  such  percentages  are  based, 
shall  be  included  in  its  annual  report  to  the  Commission. 

Depreciation  charges  with  respect  to  any  freight-train  car 
shall  cease  when  the  difference  between  the  ledger  value  and 
the  estimated  scrap  value  shall  have  been  credited  to  the  ac- 
crued depreciation  account. 

(See  general  instructions  for  income,  profit  and  loss,  and 
general  balance-sheet  accounts,  section  2.) 

Note. — All  charges  to  this  account  for  depreciation  of  the  camer'g 
equipment  shall  be  concurrently  credited  to  balance-sheet  account 
No.  776,  "Accrued  depreciation — Equipment." 

316.  FREIGHT-TRAIN  CARS— RETIREMENTS. 

This  account  shall  include  amounts  necessary  to  adjust  the 
difference  between  the  ledger  value  (less  salvage)  of  freight- 
train  cars  retired  from  service  and  the  amount  of  accrued  de- 
preciation charged  on  account  of  such  retired  cars,  to  the  date 
of  their  retirement.  (See  road  and  equipment  account  II, 
Equipment,  paragraphs  4  and  5.) 

Note. — Freight-train  cars  permanently  retired  from  service,  but 
held  pending  disposition,  shall  be  written  out  of  service,  and  carried  in 
an  appropriate  suspense  account  at  an  equitable  valuation. 

317.  PASSENGER-TRAIN  CARS— REPAIRS. 

This  account  shall  include  the  cost  of  repairing  passenger- 
train  cars  and  appurtenances  and  passenger-car  features  of 
motor  cars  used  in  transportation  service;  small  hand  tools  used 
in  repairs;  the  net  loss  sustained  on  account  of  the  destruction 
of  foreign  passenger-train  cars  in  the  carrier's  transportation 
service,  and  amounts  paid  others  for  repairs  of  passenger-train 
cars  for  which  the  carrier  is  liable. 

(Note  carefully  special  instructions,  sections  2  and  3,  and 
general  instructions  for  income,  profit  and  loss,  and  general 
balance-sheet  accounts,  section  2.) 

LIST   OP  PASSBNQER-TRAIN  CABS 

(See  special  instructions,  section  22) 

Baggage.  Buffet. 

Baggage-express.  Caf6. 

Baggage-mail.  Chair. 

Baggage-mail-expreM.  Club. 


330 


APPENDIX  B 


Colonist. 

Combination  passenger  and  bag- 
gage. 
Dining. 
Express. 
Immigrant. 
Library. 
Mail. 
MUk. 
Observation. 


Parlor. 

Parlor-baggage. 

Passenger. 

Passenger-baggage. 

Passenger-baggage-mail. 

Postal. 

Refrigerator-express. 

Sleeping. 

Smoking. 

Tourist. 


LIST  OP  APPUBTENANCES   TO   PASSENGER-TRAIN   CARS 

(See  special  instructions,  section  22) 


Air-brake    equipment,     including 

hose. 
Bedding. 
Chairs. 
Coat  hooks. 
Curtains  and  fixtures. 
Cushions. 
Electric  bells. 
Floor  coverings. 
Heating  equipment  and  steam  heat 

hose. 
Ice  boxes. 
Ice  tanks. 

Kitchen  equipment  and  utensils. 
Lighting  equipment. 


Mail  catchers. 

Parcel  racks. 

Ranges  and  boilers. 

Seats. 

Speed  recorders. 

Steam  heat  hose. 

Table  china. 

Table  glassware. 

Table  linen. 

Table  silver. 

Toilet  equipment. 

Train-signal  equipment,  including 

hose. 
Water  tanks. 


Note  A. — The  cost  of  candles,  wicks,  and  lamp  chimneys,  and  of 
globes  and  shades  for  electric  and  other  lights  in  passenger-train  cars 
shall  be  charged  to  account  No.  402,  "Train  supplies  and  expenses." 

Note  B. — The  cost  of  repairing  passenger-train  cars  of  foreign  lines, 
which  are  waybilled  as  freight  and  have  been  damaged  in  transit,  shall 
be  charged  to  account  No.  418,  "Loss  and  damage — Freight,"  and  the 
cost  of  repairing  passenger-train  cars  of  foreign  lines  having  trackage 
rights  over  the  carrier's  line,  when  damaged  by  collision,  wreck,  or 
otherwise,  for  which  the  carrier  is  liable,  shall  be  charged  to  account 
No.  416,  "Damage  to  property." 

318.  PASSENGER-TRAIN  CARS— DEPRECIATION. 

This  account  shall  include  uniform  monthly  charges  repre- 
senting the  depreciation  of  passenger-train  cars.  These  charges 
shall  be  based  upon  the  percentage  of  the  original  cost  (esti- 
mated if  not  known),  ledger  value,  or  purchase  price  of  such 
equipment  determined  to  be  equitable  from  the  carrier's  ex- 
perience and  best  sources  of  information  as  to  the  average  cur- 
rent loss  from  depreciation.    A  statement  of  the  percentages 


APPENDIX  B  331 

used  by  the  carrier  for  computing  these  charges,  together  with 
the  estimated  life  of  the  equipment  upon  which  such  percent- 
ages are  based,  shall  be  included  in  its  annual  report  to  the 
Commission. 

Depreciation  charges  with  respect  to  any  passenger-train  car 
shall  cease  when  the  difference  between  the  ledger  value  and  the 
estimated  scrap  value  shall  have  been  credited  to  the  accrued 
depreciation  account. 

(See  general  instructions  for  income,  profit  and  loss,  and 
general  balance-sheet  accounts,  section  2.) 

Note. — All  charges  to  this  account  for  depreciation  of  the  carrier's 
equipment  shall  be  concurrently  credited  to  balance-sheet  account 
No.  776,  "Accrued  depreciation — Equipment." 

319.  PASSENGER-TRAIN  CARS— RETIREMENTS. 

This  account  shall  include  amounts  necessary  to  adjust  the 
difference  between  the  ledger  value  (less  salvage)  of  passenger- 
train  cars  retired  from  service  and  the  amount  of  accrued  de- 
preciation charged  on  account  of  such  retired  cars  to  the  date 
of  their  retirement.  (See  road  and  equipment  account  II, 
Equipment,  paragraphs  4  and  5.) 

Note. — Passenger-train  cars  permanently  retired  from  service,  but 
held  pending  disposition,  shall  be  written  out  of  service  and  carried  in 
an  appropriate  suspense  account  at  an  equitable  valuation. 

320.  MOTOR  EQUIPMENT  OF  CARS— REPAIRS. 

This  account  shall  include  the  cost  of  repairing  motor  equip- 
ment affixed  to  cars;  also  cost  of  small  hand  tools  used  in  repairs. 
The  cars  to  which  this  account  has  reference  are  distinct  from 
independent  locomotives  used  for  the  propulsion  of  trains. 

(Note  carefully  special  instructions,  sections  2  and  3). 

ITEMS   OF  MOTOR   EQUIPMENT 

(See  special  instructions,  section  22) 

Batteries,  storage.  Overload  switches. 

Circuit  breakers.  Rheostats. 

Controllers.  Switches. 

Engines,  internal-combustion.  Third-rail  contact. 

Generators.  Trolley  poles. 

Lightning  arresters.  Trolleys, 
Motors. 


9S%  APPENDIX  B 

321.  MOTOR  EQUIPMENT  OF  CARS—DEPRECIATION. 
This  account  shall  mclude  uniform  monthly  charges  repre- 
senting the  depreciation  of  the  motor  equipment  of  cars.  These 
charges  shall  be  based  upon  the  percentage  of  the  original  cost 
(estimated  if  not  known),  ledger  value,  or  purchase  price  of 
such  equipment  determined  to  be  equitable  from  the  carrier's 
experience  and  best  sources  of  information  as  to  the  average 
current  loss  from  depreciation.  A  statement  of  the  percentages 
used  by  the  carrier  for  computing  these  charges,  together  with 
the  estimated  life  of  the  equipment  upon  which  such  percentages 
are  based,  shall  be  included  in  its  annual  report  to  the  Com- 
mission. 

Depreciation  charges  with  respect  to  the  motor  equipment  of 
cars  shall  cease  when  the  difference  between  the  ledger  value 
and  the  estimated  scrap  value  shall  have  been  credited  to  the 
accrued  depreciation  account. 

Note. — All  charges  to  this  account  for  depreciation  of  the  carrier's 
equipment  shall  be  concurrently  credited  to  balance-sheet  account 
No.  776,  "Accrued  depreciation — Equipment." 

322.  MOTOR  EQUIPMENT  OF  CARS— RETIREMENTS. 

This  account  shall  include  amounts  necessary  to  adjust  the 
difference  between  the  ledger  value  (less  salvage)  of  motor 
equipment  of  cars  retired  from  service,  and  the  amount  of  accrued 
depreciation  charged  on  such  retired  equipment  to  the  date  of 
its  retirement.  (See  road  and  equipment  account  II,  Equipment, 
paragraphs  4  and  5.) 

Note. — The  motor  equipment  of  cars  pennanently  retired  from 
service  but  held  pending  disposition  shall  be  written  out  of  service  and 
carried  in  an  appropriate  suspense  account  at  an  equitable  valuation. 

323.  FLOATING  EQUIPMENT— REPAIRS. 

This  account  shall  include  the  cost  of  repairing  floating  equip- 
ment (other  than  work  equipment),  including  appurtenances, 
and  cost  of  small  hand  tools  used  in  repairs. 

The  pay  and  expenses  of  captains  and  engineers  and  of  boat 
employees,  while  engaged  on  maintenance  of  floating  equip- 
ment, shall  be  included  in  this  account. 

(Note  carefully  special  instructions,  sections  2  and  3.) 


APPENDIX  B 


388 


XJST  OF  FLOATIXa   BQUIPMENT 

(9«e  special  initructions,  section  22) 


Barges. 

Canal  boats. 

Car  and  other  floats. 

Ferryboats. 

Lighters. 

Power  launches. 


Power  lighters. 

Scows, 

Steamboats. 

Steamships. 

Transfer  boats. 

Tugboats. 


LIST  OF  APPUBTEKANCB8,  TOOL  BQUIPMENT,  AND  FTJRNITUBB 

(See  special  instructions,  section  22) 


Anchors. 

Axes. 

Barometers. 

Beds  and  bedding. 

Binnacle  lamps. 

Blocks  and  tackle. 

Boilers  and  foundations. 

Cables. 

Capstan  bars. 

Carpets. 

Charts. 

China,  crockery,  and  glassware. 

Chronometers. 

Clocks. 

Compasses. 

Counters. 

Desks. 

Engines  and  foundations. 

Fire  buckets. 

Fire  extinguishers. 

Floor  coverings. 

Flue  cleaners. 

Furniture. 

Gangplanks. 

Hatchets. 

Heating  equipment. 

Hoisting  equipment. 

Hooks. 

Keys. 

Kitchen  equipment. 

Life  preservers. 


Lighting  equipment. 
Linen. 
Lines. 
Logs. 

Machinery  and  foundations. 
Masts. 

Office  furniture. 
Oil  cans. 

Pianos  and  other  musical  instru- 
ments. 
Pumps. 
Racks. 
Railings. 
Rakes. 
Rigging. 
Safes. 
Sails. 
Scales. 

Seats,  chairs,  and  cushions. 
Shovels. 

Slice  bars  and  pokers. 
Spyglasses. 

Steam  distribution  systems. 
Steering  equipment. 
Telescopes. 
Ticket  cases. 
Tool  boxes. 
Tools,  miscellaneous. 
Tracks  on  car  floats. 
Ventilating  equipment. 
Wrenches. 


Note  A. — When  the  compensation  for  the  use  of  floating  equipment 
includes  rent,  maintenance,  and  operation,  the  portion  covering  rent 
shall  be  included  in  income  account  No.  539,  "Rent  for  floating  equip- 
ment," the  portion  covering  repairs  shall  be  included  in  this  account, 
the  portion  covering  depreciation  shall  be  included  in  account  No.  324, 
*'  Floating  equipment — Depreciation,"  and  the  portion  covering  oper- 
fttion  shall  be  included  in  account  No.  408,  "Operating  floating  equip- 


334  APPENDIX  B 

ment,"  or  in  the  primary  accounts  in  general  account  V,  Transportation 
— Water  Line,  as  may  be  appropriate. 

Note  B. — The  cost  of  repairs  resulting  from  casualties  shall  be  charged 
to  the  casualty  accounts  when  covered  by  insurance  and  to  insurance 
reserves  to  the  extent  of  the  accruals  therein  when  such  reserves  have 
been  provided  for  the  damage  to  property.  Any  part  of  such  cost  not 
recoverable  from  underwriters  or  chargeable  to  insurance  reserves  shall 
be  charged  to  the  repair  account. 

324.  FLOATING  EQUIPMENT— DEPRECIATION. 

This  account  shall  include  uniform  monthly  charges  represent- 
ing the  depreciation  of  floating  equipment  other  than  work 
equipment.  These  charges  shall  be  based  upon  the  percentage 
of  the  original  cost  (estimated  if  not  known),  ledger  value,  or 
purchase  price  of  such  equipment  determined  to  be  equitable 
from  the  carrier's  experience  and  best  sources  of  information 
as  to  the  average  current  loss  from  depreciation.  A  statement 
of  the  percentages  used  by  the  carrier  for  computing  these 
charges,  together  with  the  estimated  life  of  the  equipment  upon 
which  such  percentages  are  based,  shall  be  included  in  its  annual 
report  to  the  Commission. 

Depreciation  charges  with  respect  to  any  floating  equipment 
shall  cease  when  the  difference  between  the  ledger  value  and  the 
estimated  scrap  value  shall  have  been  credited  to  the  accrued 
depreciation  account. 

Note  A. — All  charges  to  this  account  for  depreciation  of  the  carrier's 
equipment  shall  be  concurrently  credited  to  balance-sheet  account 
No.  776,  "Accrued  depreciation — Equipment." 

Note  B. — When  the  compensation  for  the  use  of  floating  equipment 
includes  rent,  maintenance,  and  operation,  the  portion  covering  rent 
shall  be  included  in  income  account  No.  539,  "Rent  for  floating  equip- 
ment," the  portion  covering  repairs  shall  be  included  in  account  No.  323, 
"Floating  equipment — Repairs,"  the  portion  covering  depreciation 
shall  be  included  in  this  account,  and  the  portion  covering  operation 
shall  be  included  in  account  No.  408,  "Operating  floating  equipment," 
or  in  the  primary  accounts  in  general  account  V,  Transportation — Water 
Line,  as  may  be  appropriate. 

325.  FLOATING  EQUIPMENT— RETIREMENTS. 

This  account  shall  include  amounts  necessary  to  adjust  the 
difference  between  the  ledger  value  (less  salvage)  of  floating 
equipment,  other  than  work  equipment,  retired  from  service 
and  the  amount  of  accrued  depreciation  charged  on  account  of 


APPENDIX  B  335 

such  retired  equipment  to  the  date  of  its  retirement.    (See  road 

and  equipment  account  II,  Equipment,  paragraphs  4  and  5.) 

Note. — When  floating  equipment  is  permanently  retired  from  service 
but  held  pending  disposition,  it  shall  be  written  out  of  service  and  carried 
in  an  appropriate  suspense  account  at  an  equitable  valuation. 

326.  WORK  EQUIPMENT— REPAIRS. 

This  account  shall  include  the  cost  of  repairing  rail  and  float- 
ing work  equipment,  including  appurtenances,  and  cost  of  small 
hand  tools  used  in  repairs. 

The  cost  of  fitting  up  commercial  cars  for  work  service  in 
connection  with  maintenance  and  operation;  the  cost  of  refitting 
them  for  commercial  service;  the  cost  of  repairs  to  locomotives 
while  in  service  for  repairs  of  road  and  equipment;  and  the  cost 
of  repairs  to  foreign  cars  damaged  while  in  such  service  shall  be 
included  in  this  account;  also  amounts  paid  in  settlement  for 
such  cars  destroyed  in  such  service. 

(Note  carefully  special  instructions,  sections  2  and  3,  and 
general  instructions  for  income,  profit  and  loss,  and  general 
balance-sheet  accounts,  section  2.) 

LIST   OF    WORK   EQUIPMENT — ^RAIL 

(See  special  instructions,  section  22) 

Air-brake  instruction  cars.  Painters'  cars. 

Ballast  cars.  Pay  cars. 

Ballast  unloader  cars.  Pile  drivers  (mounted). 

Boarding  cars.  Rail  saws  (mounted). 

Bridge  cars.  Salt  cars. 

Business  cars.  Sanding  cars. 

Camp  cars.  Scale  test  cars. 

Cinder  cars.  Scraper  cars. 

Concrete  mixers  (mounted).  Snow  dozers. 

Derrick  cars.  Snow  drags. 

Dirt  spreaders  (mounted).  Snow  plows  (not  attached  to  but 
Ditching  cars.  moved  by  locomotives). 

Dump  cars.  Sprinkling  cars. 

Dynamometer  cars.  Steam  shovels. 

Gas-tank  cars.  Steam  wrecking  derricks. 

Grading  cars.  Supply  cars. 

Gravel  cars.  Sweeper  cars. 

Indicator  cars.  Tool  and  block  cars. 
Locomotive  tanks  used  as  water       Tool  cars. 

cars.  Water  cars. 

Locomotives.  Weed  burners  (mounted). 

Officers'  cars.  Wrecking  cars. 
Outfit  cars. 


SS6 


APPENDIX  B 


APPUBTBNANCBS  TO  WOEK  EQUIPMENT — RAIIf 

(See  special  instructions)  section  22, 


Air-brake  equipment. 

Kitchen  utensils. 

Beds  and  bedding. 

Lighting  equipment. 

Blocking. 

Linen. 

Blocks  and  tackle. 

Lines. 

Boilers  on  cars. 

Machinery  on  cars. 

Bunks,  seats,  and  chairs. 

Oil  cans. 

Chains. 

Rakes. 

China,  crockery,  and  glassware. 

Ranges. 

Cushions. 

Shovels. 

Engines  on  cars. 

Slice  bars  and  pokers. 

Flue  cleaners. 

Tool  boxes. 

Hatchets. 

Tools,  miscellaneous. 

Heating  equipment. 

Train-signal  equipment. 

Hooks. 

Wrecking  trucks. 

Jackfi. 

Wrenches. 

U8T   OF   WORK   ] 

EQUIPMENT — FLOATING 

(See  special  instructions,  section  22) 

Derricks. 

Pile  drivers. 

Dredges. 

APPUBTENANCES  TO 

WOBK  EQUIPMENT— FLOATING 

(See  special  instructions,  section  22) 

Anchors. 

Keys. 

Axes. 

Life  preservers. 

Barometers. 

Lighting  equipment. 

Beds  and  bedding. 

Linen. 

Blocks  and  tackle. 

Lines. 

Boilers  and  foundations. 

Machinery  and  foundations. 

Cables. 

Masts. 

China,  crockery,  and  glassware. 

Oil  cans. 

Compasses. 

Pumps. 

Cushions. 

Rakes. 

Desks. 

Rigging. 

Engines  and  foundations. 

Sails. 

Fire  extinguishers. 

Seats  and  chairs. 

Fire  buckets. 

Shovels. 

Floor  coverings. 

Slice  bars  and  pokers. 

Flue  cleaners. 

Steam  distribution  systems. 

Gangplanks. 

Steering  equipment. 

Hatchets. 

Tool  boxes. 

Heating  equipment. 

Tools,  miscellaneous. 

Hoisting  equipment. 

Wrenches. 

Hooks. 

Note. — The  cost  of  repairs  to  work  equipment  on  account  of  con- 
■truction  work  shall  be  included  in  the  cost  of  the  construction  work 
on  which  it  is  used.  (See  general  instructions  for  the  classification  of 
investment  in  road  and  equipment,  section  4c.) 


APPENDIX  B  337 

327.  WORK  EQUIPMENT— DEPRECIATION. 

This  account  shall  include  uniform  monthly  charges  repre- 
senting the  depreciation  of  work  equipment.  These  charges 
shall  be  based  upon  the  percentage  of  the  original  cost  (esti- 
mated if  not  known),  ledger  value,  or  purchase  price  of  such 
equipment,  determined  to  be  equitable  from  the  carrier's  ex- 
perience and  best  sources  of  information  as  to  the  average  cur- 
rent loss  from  depreciation.  A  statement  of  the  percentages 
used  by  the  carrier  for  computing  these  charges,  together  with 
the  estimated  life  of  the  equipment  upon  which  such  percent- 
ages are  based,  shall  be  included  in  its  annual  report  to  the 
Commission. 

Depreciation  charges  with  respect  to  any  work  equipment 
shall  cease  when  the  difference  between  the  ledger  value  and 
the  estimated  scrap  value  shall  have  been  credited  to  the  ac- 
crued depreciation  account. 

(See  general  instructions  for  income,  profit  and  loss,  and 
general  balance-sheet  accounts,  section  2.) 

Note. — All  charges  to  this  account  for  depreciation  of  the  carrier's 
equipment  shall  be  concurrently  credited  to  balance-sheet  account  No. 
776,  "Accrued  depreciation — Equipment." 

328.  WORK  EQUIPMENT— RETIREMENTS. 

This  account  shall  include  amounts  necessary  to  adjust  the 
difference  between  the  ledger  value  (less  salvage)  of  work  equip- 
ment retired  from  service  and  the  amount  of  accrued  deprecia- 
tion charged  on  account  of  such  retired  equipment  to  the  date 
of  its  retirement.  (See  road  and  equipment  account  II,  Equip- 
ment, paragraphs  4  and  5.) 

Note. — When  work  equipment  is  permanently  retired  from  service, 
but  held  pending  disposition,  it  shall  be  written  out  of  service  and  carried 
in  an  appropriate  suspense  account  at  an  equitable  valuation. 

329.  MISCELLANEOUS  EQUIPMENT— REPAIRS. 

This  account  shall  include  the  cost  of  repairing  miscellaneous 
equipment,  such  as  wagons,  automobiles,  and  other  highway 
vehicles,  and  harness. 

(Note  carefully  special  instructions,  sections  2  and  3.) 


338  APPENDIX  B 

330.  MISCELLANEOUS  EQUIPMENT— DEPRECIATION. 

This  account  shall  include  uniform  monthly  charges  repre- 
senting the  depreciation  of  miscellaneous  equipment.  These 
charges  shall  be  based  upon  the  percentage  of  the  original  cost 
(estimated  if  not  known),  ledger  value,  or  purchase  price  of 
such  equipment,  determined  to  be  equitable  from  the  carrier's 
experience  and  best  sources  of  information  as  to  the  average 
current  loss  from  depreciation.  A  statement  of  the  bases  used 
by  the  carrier  for  computing  these  charges  shall  be  included  in 
its  annual  report  to  the  Commission. 

Note. — All  charges  to  this  account  for  depreciation  of  the  carrier's 
equipment  shall  be  concurrently  credited  to  balance-sheet  account  No. 
776,  "Accrued  depreciation — Equipment." 

331.  MISCELLANEOUS  EQUIPMENT— RETIREMENTS. 

This  account  shall  include  amounts  necessary  to  adjust  the 
difference  between  the  ledger  value  (less  salvage)  of  miscellaneous 
equipment,  including  horses,  retired  from  service  and  the  amount 
of  accrued  depreciation  charged  on  account  of  such  retired 
equipment  to  the  date  of  its  retirement.  (See  road  and  equip- 
ment account  II,  Equipment,  paragraphs  4  and  5.) 

Note, — Miscellaneous  equipment  permanently  retired  from  service, 
but  held  pending  disposition,  shall  be  written  out  of  service  and  carried 
in  an  appropriate  suspense  account  at  an  equitable  valuation. 

332.  INJURIES  TO  PERSONS. 

This  account  shall  include  expenses  on  account  of  injuries  to 
persons  which  occur  directly  in  connection  with  repairs  of  equip- 
ment. 

Services  of  employees  and  others  called  in  consultation  in 
relation  to  claim  adjustments,  pay  and  expenses  of  employees 
while  engaged  as  witnesses  at  inquests  and  lawsuits,  and  a  suit- 
able proportion  of  donations  made  to  hospitals  shall  be  included 
in  this  account. 

ITEMS   OF   EXPENSE 

(See  special  instructions,  section  22) 
Artificial  Kmbs.  Compensation  for  injuries  or  death. 

Carriage  fees.  Final  judgments,  including  plain- 

Claim  adjusters'  and  clerks  'serv-  tiffs'  court  costs. 

ices.  Funeral  expenses. 

Claim  adjusters'  ofl5ce  expenses.  Hospital  attendance. 


APPENDIX  B  339 

Medical  and  surgical  services.  Undertakers'  services. 
Medical  and  surgical  supplies.  Undertakers'  supplies. 
Notarial  fees.  Witnesses'  fees  and  expenses  at  in- 
Nursing,  quests  and  lawsuits. 
Railway  transportation. 

Note  A. — Expenses  incident  to  personal  injury  suits,  not  otherwise 
provided  for,  shall  be  included  in  account  No.  454,  "Law  expenses." 

Note  B. — Amounts  donated  by  a  carrier  to  hospitals  shall  be  distrib- 
uted, 25  per  cent  to  account  No.  274,  "Injuries  to  persons";  25  per  cent 
to  account  No.  332,  "Injuries  to  persons";  and  50  per  cent  to  account 
No.  420,  "Injuries  to  persons." 

Note  C. — The  pay,  office  rent,  and  office  and  other  expenses  of  claim 
adjusters,  claim  clerks,  and  others  in  charge  of  or  engaged  in  connection 
with  claim  cases,  when  not  assignable  to  a  distinct  class  of  claims,  shall  be 
apportioned  equally  among  the  several  classes  of  claims  over  which  they 
have  jurisdiction  or  in  connection  with  which  they  are  engaged. 

333.  INSURANCE. 

This  account  shall  include  premiums,  except  reinsurance 
premiums,  for  insuring  the  carrier  against  loss,  through  injuries 
to  persons  or  damage  to  or  destruction  or  loss  of  property, 
whether  caused  by  fire,  accident,  or  other  cause,  when  such  loss 
to  the  carrier  would  be  chargeable  to  Maintenance  of  Equip- 
ment; also  premiums  on  fidelity  bonds  of  employees  whose  pay 
is  chargeable  to  Maintenance  of  Equipment.  (See  special  in- 
structions, section  18.) 

Note. — The  premiums  paid  by  the  carrier  to  its  insurance  fund  shall 
be  credited  to  an  insurance  reserve  account,  to  which  account  shall  be 
charged  the  amount  of  all  claims  for  injuries  to  persons  and  damages 
to  the  property  covered  by  its  insurance.  To  such  account  shall  also  be 
charged  all  reinsurance  premiums  paid  to  insurance  companies,  and  to 
it  shall  be  credited  all  amounts  recovered  from  insurance  companies 
for  damage  to  the  property  reinsured  by  them. 

334.  STATIONERY  AND  PRINTING. 

This  account  shall  include  the  cost  of  stationery  and  printing 
used  in  connection  with  maintenance  of  equipment. 

STATIONERY   AND   PRINTING    ITEMS 

(See  special  instructions,  section  22) 

Adding  machines.  Bristol  board. 

Addressographs  and  supplies.  Calculating  machines. 

Arm  rests.  Calendars. 

Binders.  Carbon  paper. 

Blank  books.  Cardboard. 

Blotters.  Cards,  blank  and  printed. 

Blotting  paper.  Circulars. 


840 


APPENDIX  B 


Computing  tables. 

Copy  (impression)  books. 

Copying  brushes. 

Copying  presses. 

Crayons. 

Cyclostyles. 

Dating  stamps  and  ribbons. 

Dictaphones. 

Dictographs. 

Drawing  paper. 

Duplicators. 

Electric  pens. 

Envelopes. 

Erasers,  rubber  and  steel. 

Eyelet  punches. 

Eyelets. 

File  boxes,  paper. 

Forms,  blank  and  printed. 

Glass  pens. 

Hectographs. 

Indexes. 

Ink  for  writing  and  drawing. 

Inkstands. 

Invoice  books. 

Legal  cap  paper. 

Letter  paper. 

Manifold  paper. 

Manifold  pens. 

Mimeographs. 

Mucilage. 

Mucilage  brushes. 

Neostyles. 

Note  paper. 

Notices. 

Numbering  stamps. 

Oil  paper. 

Paper. 

Paper  baskets. 

Paper  clips. 

Paper  cutters. 

Paper  fasteners. 

Paper  files. 

NoTB. — The  cost  of  dictionaries,  periodicals,  technical  books, 
shall  be  included  in  the  appropriate  superintendence  accounts. 


Paper  weights. 
Papyrographs. 
Parchment  paper. 
Pencil  sharpeners. 
Pencils  for  writing  and  drawing. 
Penholders. 
Penracks. 

Pens  for  writing  and  drawing. 
Phonographs  and  records. 
Pins. 
Postage. 

Punches  (not  conductors'  or  bag- 
gagemen's). 
Rubber  bands. 
Rubber  stamps. 
Rulers. 
Ruling  pens. 
Scrapbooks. 
Sealing  wax. 
Seals. 
Shears. 

Shipping  tags. 
Shorthand  notebooks. 
Sponge  cups. 
Sponges. 

Stamps,  impression. 
Stylographs. 

Tablets,  blank  and  printed. 
Tape. 

Telegraph  blanks. 
Tissue  (impression)  paper. 
Tracing  cloth. 
Tracing  paper. 
Twine. 

Typewriters  and  ribbons. 
Wage  tables. 
Wastebaskets. 
Water  colors. 
Water  holders. 
Wrapping  paper. 
Wringers  for  copying  presses. 

etc.. 


335.  OTHER  EXPENSES. 

This  account  shall  include  expenses  in  connection  with  the 
maintenance  of  equipment  not  properly  chargeable  to  other 
accounts  for  maintenance  of  equipment  or  to  clearing  accounts 
Buch  as  "Material  store  expenses"  and  "Shop  expenses." 


APPENDIX  B  341 

ITEMS   OF   EXPENSE 

(See  special  instructions,  section  22) 

Pay  and  expenses  of  mechanical  department  employees  attending  con- 
ferences with  officers  in  connection  with  mechanical  department  wage 
disputes. 

Fees  paid  arbitrators  in  connection  with  mechanical  department  wage 
disputes. 

Payments  to  mechanical  department  employees  for  time  absent  on 
account  of  sickness  when  not  in  compensation  for  personal  injuries. 

336.  MAINTAINING    JOINT    EQUIPMENT    AT    TER- 

MINALS—DR. 
This  account  shall  include  the  carrier's  proportion  of  expenses 
incurred  by  others  in  maintaining  equipment  used  for  the  opera- 
tion of  joint  terminals,  including  the  carrier's  proportion  of  ex- 
penses of  repairing  equipment  made  necessary  by  accidents  in 
terminals,  when  such  expenses  are  participated  in  by  more  than 
one  party  using  the  joint  terminals. 

Note. — The  purpose  of  this  account  is  to  show  the  amount  accruing 
against  the  carrier  for  its  proportion  of  the  expense  of  maintaining  equip- 
ment at  terminals  which  is  maintained  by  others  and  in  the  joint  use 
of  which  the  carrier  participates. 

337.  MAINTAINING    JOINT    EQUIPMENT    AT    TER- 

MINALS—CR. 
This  account  shall  include  amounts  chargeable  to  others  as 
their  proportions  of  expenses  incurred  by  the  carrier  in  main- 
taining equipment  used  for  the  operation  of  joint  terminals,  and 
for  expenses  of  repairing  equipment  made  necessary  by  accidents 
in  terminals,  when  such  expenses  are  participated  in  by  more 
than  one  party  using  the  joint  terminals. 

Note. — The  purpose  of  this  account  is  to  show  the  amounts  accruing 
in  favor  of  the  carrier  and  against  others  for  their  proportions  of  the 
expense  of  maintaining  equipment  at  terminals  which  is  maintained  by 
the  carrier  and  in  the  joint  use  of  which  others  participate. 

HI.  TRAFFIC. 

The  primary  accounts  included  in  this  general  account  are 
designed  to  show  the  expenses  incurred  for  advertising,  solicit- 
ing, and  securing  traffic  for  the  carrier's  lines  and  for  preparing 
and  distributing  tariffs  governing  such  traffic. 

The  accounts  for  traffic  expenses  shall  be  kept  in  such  manner 
as  to  show  separately,  by  primary  accounts,  the  expenses  directly 
assignable  to  water-line  operations. 


342  APPENDIX  B 

351.  SUPERINTENDENCE. 

This  account  shall  include: 

Pay  of  Officers. — The  pay  of  officers  directly  in  charge  of 
or  engaged  in  supervising  the  procurement  of  traffic,  and  the 
preparation  and  distribution  of  tariffs,  division  sheets,  and 
classifications. 

LIST   OP   OFFICERS 

(See  special  instructions,  section  22) 

Vice  president.  General  passenger  agent. 

Assistant  to  vice  president.  Assistant  general  passenger  agent. 

TraflBc  director.  Division  passenger  agent. 

TraflBc  manager.  Division  freight  agent. 

General  freight  agent.  General  baggage  agent. 

Assistant  general  freight  agent.  General  express  agent. 

Chief  of  tariff  bureau.  General  express  manager. 

Traveling  tariff  inspector.  Coal  traffic  agent. 
Live  stock  agent. 

Pay  of  Clerks  and  Attendants. — ^The  pay  of  clerks  and 
other  employees  in  the  offices  and  on  business  cars  of  officers 
whose  pay  is  chargeable  to  this  account. 

LIST   OF   EMPLOYEES 

(See  special  instructions,  section  22) 

Chief  clerk.  Messengers. 

Clerks.  Cooks. 

File  clerks.  Porters. 

Stenographers.  Attendants. 

Office  and  Other  Expenses. — Office  expenses  and  other 
expenses  of  officers  and  employees  whose  pay  is  chargeable  to 
this  account. 

ITEMS   OF   EXPENSE   AND   SUPPLIES 

(See  special  instructions,  section  22) 

Atlases  and  maps.  Official  train  service. 

Barometers.  Periodicals  and  newspapers. 

Bicycles.  Power. 

Books  for  office  use.  Provisions  for  business  cars. 

Business  car  service.  Rent  of  offices. 

Express  charges.  Repairs  of  rented  offices. 
Fees  and  dues  in  commercial  and       Telegraph  service, 

other  clubs.  Telephone  service. 

Furniture  repairs  and  renewals.  Traveling  expenses. 

Heating.  Water  and  ice. 
Lighting. 


APPENDIX  B  343 

Note  A. — When  officers  designated  above  have  supervision  over 
more  than  one  department,  their  salaries,  the  pay  of  their  clerks  and 
attendants,  and  their  office  and  other  expenses  shall  be  apportioned 
equally  among  the  departments  over  which  they  have  jurisdiction. 

Note  B. — The  pay  and  expenses  of  officers  engaged  exclusively  in 
soliciting  traffic  are  chargeable  to  account  No.  352,  "Outside  agencies." 

Note  C. — The  cost  of  stationery  for  traffic  offices  is  chargeable  to 
account  No.  358,  "Stationery  and  printing,"  except  stationery  charge- 
able to  accounts  Nos.  354,  355,  and  366. 

352.  OUTSIDE  AGENCIES. 

This  account  shall  include  the  pay,  and  the  office,  traveling, 
and  other  expenses  of  general,  commercial,  city,  and  district 
agents  and  others  soliciting  trafl&c,  the  employees  of  their  of- 
fices, and  traveling  agents  and  solicitors  located  on  or  off  the 
line  of  the  carrier's  road. 

City  ticket  and  freight  offices,  separate  from  regular  station 
ticket  and  freight  offices,  shall  be  treated  as  outside  agencies; 
the  pay  and  expenses  of  the  employees  therein  and  the  expenses 
of  such  offices  shall  be  charged  to  this  account. 

Commissions  for  services  pertaining  to  either  freight  or  pas- 
senger business,  except  conamissions  paid  in  lieu  of  salaries  to 
carrier's  agents  located  upon  the  carrier's  own  line  (which  shall 
be  charged  to  account  No.  373,  "Station  employees"),  shall 
be  included  in  this  account. 

ITEMS   OF   EXPENSE 

(See  special  instructions,  section  22) 

Bicycles.  Office  supplies. 

Books  for  office  use.  Periodicals  and  newspapers. 

Express  charges.  Rent  of  offices. 

Furniture  repairs  and  renewals.  Repairs  of  rented  offices. 

Heating.  Telegraph  service. 

Lighting.  Telephone  service. 

Membership   fees   and   dues  in  Traveling  expenses, 

agency  associations.  Water  and  ice. 

Membership  fees  and  dues  in  com- 
mercial clubs. 

353.  ADVERTISING. 

This  account  shall  include  the  cost  of  advertising  for  the 
purpose  of  securing  traffic;  pay  of  advertising  agents,  their  clerks 
and  attendants;  rent  of  offices,  and  the  office,  traveUng,  and 
other  expenses  of  such  employees;  also  donations  to  carnivals, 


344  APPENDIX  B 

local   development  associations,   summer  schools,   and   other 
gatherings,  when  made  for  the  purpose  of  increasing  traffic. 

ITEMS   OF  ADVERTISING   EXPENSE 

(See  special  instructions,  section  22) 

Advertisements  in  newspapers.  Express  charges. 

Advertisements  in  periodicals.  Frames. 

Bulletin  boards  and  cards.  Handbills. 

Card  cases.  Maps  used  for  advertising. 

Customs   charges   on    advertising       Pamphlets. 

matter.  Photographs  and  views. 
Display    and    other    advertising       Postage. 

cards.  Posters. 

Distributing  folders.  PubUshing  advertising  matter. 

Distributing    general    notices  to       Publishing  folders. 

shippers.  Publishing  notices  to  shippers. 

Distributing  time-tables.  Publishing  time-tables. 

Dodgers.  Racks. 

Note. — Advertising  expenses  of  industrial  and  immigration  bureaus 
shall  be  included  in  account  No.  356,  "Industrial  and  immigration 
bureaus." 

354.  TRAFFIC  ASSOCIATIONS. 

This  account  shall  include  the  cost  to  the  carrier  of  participa- 
tion in  traffic  associations,  including  its  proportion  of  the  pay 
of  officers  and  employees  of  such  associations  and  of  their  office, 
stationery  and  printing,  traveling,  and  other  expenses. 

LIST   OF   TRAFFIC   ASSOCIATIONS 

(See  special  instructions,  section  22) 
Boards  of  trade.  Mileage  ticket  bureaus. 

Classification  bureaus.  Passenger  associations. 

Clergy  bureaus.  Tariff  bureaus. 

Commercial  associations.  Ticket  validating  agencies. 

Freight  associations. 

355.  FAST  FREIGHT  LINES. 

This  account  shall  include  the  cost  to  the  carrier  of  participa- 
tion in  fast  freight  or  dispatch  organizations,  including  its  pro- 
portion of  the  pay  of  officers,  soliciting  agents,  and  employees 
of  such  organizations,  and  their  office,  stationery  and  printing, 
traveling,  and  other  expenses. 

356.  INDUSTRIAL  AND  IMMIGRATION  BUREAUS. 
This  account  shall  include  the  cost  to  the  carrier  of  industrial 

and  immigration  bureaus,  including  the  pay  of  industrial  and 


APPENDIX  B  S45 

immigration  agents,  and  exhibit  agents,  their  clerks  and  at- 
tendants and  their  oflBce,  stationery  and  printing,  traveling, 
and  other  expenses. 

ITEMS   OF   EXPENSE 

(See  special  instructions,  section  22) 

Advertising.  Exhibits. 

Agricultural  trains.  Experimental  farms. 

Dairy  trains.  Good  roads  trains. 

Donations  to  expositions.  Premiums  to  fairs. 

Donations  to  fairs.  Premiums  to  stock  shows. 
Donations  to  stock  shows. 

357.  INSURANCE. 

This  account  shall  include  premiums,  except  reinsurance 
premiums,  for  insuring  the  carrier  against  loss  through  injuries 
to  persons  or  damage  to  or  destruction  or  loss  of  property, 
whether  caused  by  fire,  accident,  or  other  cause,  when  such  loss 
to  the  carrier  would  be  chargeable  to  Traffic;  also  premiums  on 
fidelity  bonds  of  employees  whose  pay  is  chargeable  to  Traffic. 
(See  special  instructions,  section  2.) 

Note. — The  premiums  paid  by  the  carrier  to  its  insurance  fund  shall 
be  credited  to  an  insurance  reserve  account,  to  which  account  the  amount 
of  all  claims  for  injuries  to  persons  and  damages  to  the  property  covered 
by  its  insurance  shall  be  charged.  To  such  account  shall  also  be  charged 
all  reinsurance  premiums  paid  to  insurance  companies,  and  to  it  shall 
be  credited  all  amounts  recovered  from  insurance  companies  for  dam- 
age to  the  property  reinsured  by  them. 

358.  STATIONERY  AND  PRINTING. 

This  account  shall  include  the  cost  of  stationery  and  printing 
used  in  connection  with  securing  traffic,  including  the  cost  of 
tariffs  governing  such  traffic. 

STATIONERY   AND   PBINTINQ   ITEMS 

(See  special  instructions,  section  22) 

Adding  machines.  Carbon  paper. 

Arm  rests.  Cardboard. 

Binders.  Cards,  blank  and  printed. 

Blank  books.  Circulars. 

Blotters.  Classifications. 

Blotting  paper.  Computing  tables. 

Bristol  board.  Copy  (impression)  books. 

Calculating  machine*.  Copying  brushes. 

Calendars.  Copying  presses. 


346 


APPENDIX  B 


Crayons. 

Cyclostyles. 

Dating  stamps  and  ribbons. 

Dictaphones. 

Dictographs. 

Division  sheets. 

Duplicators. 

Electric  pens. 

Envelopes. 

Erasers,  rubber  and  steel. 

Eyelet  punches. 

Eyelets. 

File  boxes,  pai)er. 

Flexotype  machines. 

Forms,  blank  and  printed. 

Freight  classifications. 

Glass  pens. 

Hectographs. 

Indexes. 

Ink  for  writing  and  drawing. 

Inkstands. 

Invoice  books. 

Legal  cap  paper. 

Letter  paper. 

Manifold  paper. 

Manifold  pens. 

Mimeographs. 

Mucilage. 

Mucilage  brushes. 

Neostyles. 

Note  paper. 

Notices. 

Numbering  stamps. 

Oil  paper. 

Paper. 

Paper  baskets. 

Paper  clips. 

Paper  cutters. 

Paper  fasteners. 

Paper  files. 


Paper  weights. 
Papyrographs. 
Pencil  sharpeners. 
Pencils  for  writing  and  drawing. 
Penholders. 
Penracks. 

Pens  for  writing  and  drawing. 
Phonographs  and  records. 
Pins. 
Postage. 

Punches  (not  conductors'  or  bag- 
gagemen's) . 
Rate  sheets. 
Rubber  bands. 
Rubber  stamps. 
Rulers. 
Ruling  pens. 
Scrapbooks. 
Sealing  wax. 
Seals. 
Shears. 

Shipping  tags. 
Shorthand  notebooks. 
Sponge  cups. 


Stamps,  impression. 

Stylographs. 

Tablets,  blank  and  printed. 

Tape. 

Tariffs,  printed. 

Telegraph  blanks. 

Tissue  (impression)  paper. 

Typewriters  and  ribbons. 

Wage  tables. 

Wastebaskets. 

Water  colors. 

Water  holders. 

Wrapping  paper. 

Wringers  for  copjdng  presses. 


etc. 


Note  A. — The  cost  of  dictionaries,  periodicals,  technical  books, 
shall  be  included  in  the  appropriate  superintendence  accounts. 

Note  B. — The  cost  of  stationery  and  printing  used  by  traffic  associa- 
tions, fast  freight  lines,  and  industrial  and  immigration  bureaus  shall  be 
included  in  the  accounts  provided  for  the  expenses  of  such  organizations. 


359.  OTHER  EXPENSES. 

This  account  shall  include  all  expenses  in  connection  with 
traffic  not  properly  chargeable  to  other  traffic  accounts. 


APPENDIX  B  347 

IV.  TRANSPORTATION-RAIL  LINE. 

The  primary  accounts  included  in  this  general  account  are 
designed  to  show  expenses  incurred  for  transporting  persons  and 
the  property  of  others,  including  the  expenses  of  station,  train, 
yard,  and  terminal  service;  also  the  expense  of  transporting 
company  material  in  transportation  service  trains. 

371.  SUPERINTENDENCE. 

This  account  shall  include: 

Pay  of  Officers. — The  pay  of  officers  directly  in  charge  of 
or  engaged  in  conducting  transportation. 

LIST   OF   OFFICERS 

(See  special  instructions,  section  22) 

Vice  president.  Members  of  examining  boards. 

Assistant  to  the  vice  president.  Superintendent  of  mail  service. 

General  manager.  Traveling  train  and  station  inspec- 

Assistant  general  manager.  tors. 

General  superintendent  of  trans-  Air-brake  instructor. 

portation.  Superintendent  of  agencies. 

Superintendent  of  transportation.  Superintendent  of  transfer  stations 

General  superintendent.  Trainmaster. 

Assistant  general  superintendent.  Assistant  trainmaster. 

Superintendent,  General  road  foreman  of  locomo- 

Division  superintendent.  tives. 

Assistant  division  superintendent.  Road  foreman  of  locomotives. 

Superintendent  of  car  service.  Traveling  locomotive  engineer. 

Chief  special  agent.  Traveling  locomotiye  fireman. 

Pay  of  Clerks  and  Attendants. — The  pay  of  clerks  and 
others  employed  in  the  offices  and  on  business  cars  of  officers 
whose  pay  is  chargeable  to  this  account. 

LIST   OF    EMPLOYEES 

(See  special  instructions,  section  22) 
Division  clerk.  Stenographers. 

Chief  clerk.  Messengers. 

Clerks.  Cooks. 

Special  agents.  Porters. 

Detectives. 

Office  and  Other  Expenses. — Office  expenses  and  other 
expenses  of  officers  and  employees  whose  pay  is  chargeable  to 
this  account;  also  the  pay  and  expenses  of  employees  attending 
investigations  concerning  the  cause  of  or  responsibility  for  ac- 


348  APPENDIX  B 

cidents,  and  amounts  paid  detective  agencies  and  others  for 
work  in  connection  witli  such  investigations. 

ITEMS   OF   EXPENSE   AND    SUPPLIES 

(See  special  instructions,  section  22) 

Atlases  and  maps.  Periodicals  and  newspapers. 

Barometers.  Power. 

Books  for  office  use.  Provisions  for  business  cars. 

Business  car  service.  Rent  of  air-brake  instruction  cars. 

Express  charges.  Rent  of  offices. 

Fees  and  dues  in  associations.  Repairs  of  rented  offices. 

Furniture  repairs  and  renewals.  Telegraph  service. 

Heating.  Telephone  service. 

Lighting.  Traveling  expenses. 

Official  train  service.  Water  and  ice. 

Note  A. — When  officers  designated  above  have  supervision  over 
more  than  one  department,  their  salaries,  the  pay  of  their  clerks  and 
attendants,  and  their  office  and  other  expenses  shall  be  apportioned 
equally  among  the  departments  over  which  they  have  jurisdiction. 

Note  B. — The  cost  of  stationery  purchased  for  transportation  offices 
is  chargeable  to  account  No.  410,  "Stationery  and  printing." 

372.  DISPATCHING  TRAINS. 

This  account  shall  include  the  pay  of  chief  and  other  train 
dispatchers,  their  clerks,  copying  operators,  and  attendants,  and 
pay  of  operators  on  the  Une  whose  duties  are  confined  to  direct- 
ing train  movements;  also  the  office,  traveling,  and  other  ex- 
penses of  such  employees. 

Note. — Pay  of  operators  who  also  perform  station  work  shall  bo 
charged  to  account  No.  373,  "Station  employees." 

373.  STATION  EMPLOYEES. 
This  account  shall  include: 

Agents,  Clerks,  and  Attendants. — The  pay  of  agents, 
clerks,  and  attendants  in  charge  of,  or  engaged  in,  the  operation 
of  stations,  wharves,  and  piers  located  on  the  carrier's  line;  also 
payments  to  such  station  or  ticket  agents  in  lieu  of  salaries. 

Special  payments  to  customs  inspectors  on  account  of  opening 
and  resealing  cars  under  unusual  conditions,  and  payments  to 
produce-exchange  inspectors  for  inspecting,  measuring,  and 
weighing  grain  shall  be  here  included. 


APPENDIX  B 


349 


LIST   OF   EMPLOTEB8 

(See  special  instructions,  section  22) 


Accountants. 

Assistant  agents. 

Assistant  depot  masters. 

Assistant  stationmastors. 

Baggage  agents  at  stations. 

Baggagemen. 

Car  clerks. 

Cashiers. 

Chauffeurs. 

Clerks. 

Collectors. 

Customs  inspectors. 

Depot  masters. 

Detectives. 

Express  agents. 

Gatemen. 

Information  bureau  employees. 

Janitors. 

Maids. 


Matrons. 
Messengers. 

Package    and    parcel    room    em- 
ployees. 
Policemen. 
Porters. 
Relief  agents. 
Station  agents. 
Station  foremen. 
Station  passenger  agents. 
Station  freight  agents. 
Stationmasters. 

Telegraph  and  telephone  operators. 
Ticket  agents. 
Ticket  collectors. 
Ticket  examiners. 
Train  callers. 
Ushers. 
Watchmen. 


Labor  at  Stations. — Station  and  other  labor  expended  in 
handling  freight,  mail,  baggage,  and  express  at  stations,  wharves, 
and  piers;  in  loading,  unloading,  feeding,  and  watering  stock; 
in  disinfecting  stations,  stockyards,  and  stock  pens;  in  transfer- 
ring, picking  up,  straightening,  and  reloading  freight  in  the  or- 
dinary course  of  transportation;  in  miscellaneous  station  work, 
including  (when  done  by  station  employees)  cleaning  station 
grounds,  station  platforms,  walks,  stockyards,  and  stock  pens, 
and  removing  snow  and  ice  therefrom;  and  in  tending  switch 
lamps  not  in  yards  and  tenninals. 

Payments  to  elevator  companies  (when  not  made  as  division 
of  rate)  for  transferring  grain  en  route,  and  payments  to  other 
companies  and  individuals  for  loading  and  unloading-  commer- 
cial freight  under  contract  or  otherwise  shall  be  included  in 
this  account. 

LIST   OF    EMPLOYEES 

(See  special  instructions,  section  22) 

Baggage  storeroom  employees.  Electricians. 

Car  sealers.  Freight  callers. 

Checkmen.  Freight  handlers. 

Coal  handlers.  Freight  house  foremen. 

Coopers.  Freight  loaders, 

pelivery  mei^.  freight  unloaders, 


350  APPENDIX  B 

Longshoremen.  Stock-pen  laborers. 

Mail  carriers.  Tallymen. 

Mail  weighers.  Teamsters. 

Station  cleaners.  Truckmen. 

Stationary  engineers.  Warehousemen. 

Stationary  firemen.  Weighmasters. 
Stevedores. 

Note  A. — The  cost  of  transferring  freight,  mail,  baggage,  and  express 
on  account  of  wrecks  shall  be  included  in  account  No.  415,  "Clearing 
wrecks." 

Note  B. — This  account  shall  not  include  the  pay  of  telegraph  and 
telephone  operators  provided  for  under  accounts  No.  372,  "Dispatching 
trains,"  and  No.  407,  "Telegraph  and  telephone  operation,"  or  pay  of 
employees  provided  for  under  account  No.  375,  "  Coal  and  ore  wharves." 

374.  WEIGHING,     INSPECTION,    AND    DEMURRAGE 

BUREAUS. 
This  account  shall  include  the  cost  to  the  carrier  of  its  partici- 
pation in  joint  weighing,  inspection,  demurrage,  and  car  dis- 
tribution bureaus  and  associations. 

375.  COAL  AND  ORE  WHARVES. 

This  account  shall  include  the  cost  of  operating  docks,  and 
wharves,  piers,  and  other  marine,  lake,  or  river  landings,  and  the 
machinery  located  thereon,  used  in  connection  with  the  trans- 
portation of  coal  and  ore. 

Labor  and  Expenses. — ^The  pay  and  the  office,  traveling, 
and  other  expenses  of  employees  engaged  in  operating  coal  and 
ore  wharves. 

Tools  and  Supplies. — The  cost  of  all  tools  and  supplies  used 
in  the  operation  of  coal  and  ore  wharves. 

ITEMS   OF  TOOLS   AND    SUPPLIES 

(See  special  instructions,  section  22) 

Cylinder  oil.  Picks. 

Fuel  for  stationary  boilers.  Shovels. 

Illuminating  oil.  Slice  bars. 

Lantern  parts.  Waste. 

Lanterns.  Wicks. 
Lubricating  oil. 

Note. — The  cost  of  switching  service  in  connection  with  coal  and  ore 
wharves  shall  not  be  included  in  this  account. 

376.  STATION  SUPPLIES  AND  EXPENSES. 
This  account  shall  include: 

Heating. — The  cost  of  fuel  (including  cost  of  unloading), 


APPENDIX  B  351 

water,  steam,  and  miscellaneous  supplies  used  for  heating  sta- 
tions, waiting  rooms,  freight  and  passenger  offices,  and  other 
station  buildings. 

Lighting. — The  cost  of  fuel,  water,  gas,  oil,  electricity,  lamp 
globes,  lamp  chimneys,  wicks,  lamp  carbons,  incandescent 
lamps,  and  miscellaneous  supplies  used  in  lighting  stations, 
waiting  rooms,  freight  and  passenger  ofiBces,  other  station  build- 
ings, street  approaches  thereto,  and  passenger  footbridges  and 
subways  at  stations. 

Other  Expenses. — The  cost  of  miscellaneous  station  supplies 
and  station  expenses. 

ITEMS   OF  EXPENSE 

(See  special  instructions,  section  22) 

Cleaning  privy  vaults.  Rent  of  scales. 

Express  charges.  Rent    of    station    buildings    (not 

Feeding  and  shoeing  horses.  jointly  used) . 

Furniture  repairs  and  renewals.  Reports  to  agents  of  commercial 

Garage  expenses.  standing. 

Licenses  for  ticket  agents.  Sprinkling  station  grounds. 

Mail  transfer  by  others  than  em-  Station  employees*  expenses. 

ployees.  Telegraph  service. 

Membership    fees    and    dues    in  Telephone  service 

agents'  associations.  Warehouse  charges  for  storage  of 

Power  for  station  machinery.  freight. 

Rent  of  automatic  weighing  and  Washing  towels. 

recording  devices. 

ITEMS   OF  TOOLS   AND    SUPPLIES 

(See  special  instructions,  section  22) 


Atlases  and  maps.  Car-seal 

Auto  trucks.  Car  seals. 

Awnings.  Carpets. 

Axes.  Chains. 

Badges.  Chair  cushions. 

Baggage  checks.  Chairs. 

Barometers.  Chalk. 

Baskets.  Chamois  skins. 

Bicycles.  Check  boxes. 

Blocking.  Check  racks. 

Brooms.  Checks. 

Brushes.  Clocks. 

Buckets.  Coal  hods. 

Bulletin  boards.  Cold  chisels. 

Call  bells.  Cooperage  material. 

Candles.  Copy-press  stands. 


S5% 


APPENDIX  B 


Counter  brushes. 

Counter  scales. 

Cups. 

Curtains. 

Cuspidora 

Desks. 

Dippers. 

Directories. 

Dusters. 

Electric  fans. 

Electric  lamps. 

Electric-light  supplies. 

Feather  dusters. 

Feed  for  horses. 

Files,  document. 

Fire  buckets. 

Fire  grenades. 

Flags. 

Floor  coverings. 

Gangplanks. 

Gas. 

Gasoline. 

Hampers. 

Hatchets. 

Hoes. 

Hooks. 

Hose  and  couplings. 

Ice. 

Ice  barrels. 

Ice  boxes. 

Ice  buckets. 

Ice  carts. 

Ice  tongs. 

Keys. 

Ladders. 

Lamp  burners. 

Lamp  chimneys. 

Lamp  fittings. 

Lamp  globes. 

Lamp  mantles. 

Lampblack. 

Lamps  (not  permanently  attached 

to  buildings). 
Lantern  fittings. 
Lantern  globes. 
Lanterns. 
Letters  boxes. 
Mail  bags. 
Marking  brushes. 
Marking  pots. 
Marline. 
Matches. 


Measures. 
Medical  boxes. 
Medical  supplies. 
Mirrors. 
Money  drawers. 
Nails  for  boxing. 
Newspapers. 
Oil. 

Oil  cans. 

Packing  material. 
Padlocks. 
Pails. 

Pinch  bars. 

Punches  for  baggagemen  and  gate- 
men. 
Rakes. 
Reflectors. 

Rolling  chairs  for  invalids. 
Safes. 
Sawdust. 
Saws. 
Scoops. 

Scales,  portable. 
Scrubbing  brushes. 


Shovels. 

Sledges. 

Soap. 

Spades. 

Sponges. 

Sprinkling  cans. 

Stools. 

Stove  blacking. 

Stoves  and  stovepipe. 

Switch  lamp    supplies    at    points 

where  regular  switching  service 

is  not  maintained. 
Tables. 
Tacks. 

Tarpaulins  (not  for  cars). 
Thermometers. 
Ticket  cases. 
Tongs. 
Tool  boxes. 
Torpedoes. 
Towels. 
Trucks. 
Twine. 
Uniforms. 
Washbasins. 
Waste. 
Water. 


APPENDIX  B  35S 

Water  barrels.  Wheelbarrows. 

Water  bowls.  Whisk  brooms. 

Water  cans.  Wicks. 

Water  coolers.  Wrenches. 
Water  pails. 

377.  YARDMASTERS  AND  YARD  CLERKS. 

This  account  shall  include  the  pay  of  general  yardmaster, 
yardmaster,  assistant  yardmaster,  general  yard  foreman,  and 
yard  clerks  and  attendants  in  yards  where  regular  switching 
service  is  maintained  and  in  terminal  switching  and  transfer 
service,  including  employees  engaged  in  calling  yardmen  and 
trainmen;  also  pay  of  policemen,  watchmen,  and  detectives  in 
yard  service.  (See  account  No.  389,  "Yard  supplies  and  ex- 
penses.") 

378.  YARD  CONDUCTORS  AND  BRAKEMEN. 

This  account  shall  include  the  pay  of  yard  conductors  or 
foremen  and  yard  brakemen  or  switchmen  handling  cars  in 
passenger  and  freight  yards  where  regular  switching  service  is 
maintained  and  in  terminal  switching  and  transfer  service, 
including  pay  while  deadheading  in  connection  with  such  service. 
(See  account  No.  389,  "Yard  supplies  and  expenses.") 

Note. — When  conductors  and  brakeman  are  engaged  in  both  train 
and  yard  service  their  pay  shall  be  apportioned  between  the  train  and 
yard  accounts  on  the  basis  of  service  rendered.  This  does  not  apply  to 
train  switching  service  performed  by  train  crews,  the  entire  pay  of  whom 
shall  be  charged  to  account  No.  401,  "Trainmen." 

379.  YARD  SWITCH  AND  SIGNAL  TENDERS. 

This  account  shall  include  the  pay  of  employees  in  yards 
where  regular  switching  service  is  maintained,  who  are  engaged 
in  the  operation  of  yard  switches  and  signals,  including  inter- 
lockers  used  solely  or  principally  for  the  government  of  all  move- 
ments of  locomotives  and  trains  between  main  and  yard  tracks, 
movements  of  locomotives  between  yard  tracks  and  engine- 
houses,  and  yard  switching  movements.  (See  account  No.  389, 
"Yard  supplies  and  expenses.") 


354  APPENDIX  B 

LIST   OF   EMPLOYEES 

(See  special  instructions,  section  22) 

Battery  men.  Lever  men. 

Interlocker  oilers.  Signalmen. 

Lamp  cleaners.  Switch  oilers. 

Lamp  men.  Switch  tenders. 

Lamplighters.  Tower  men. 

380.  YARD  ENGINEMEN. 

This  account  shall  include  the  pay  of  yard  engineers,  and 
firemen  while  engaged  in  yards  where  regular  switching  service 
is  maintained  and  in  terminal  switching  and  transfer  service, 
including  pay  of  such  employees  while  deadheading  in  connec- 
tion with  yard  service. 

Note. — The  pay  of  engineraen  on  locomotives  engaged  in  more  than 
one  class  of  service  shall  be  apportioned  on  the  basis  of  service  rendered. 
Pay  of  enginemen  on  train  locomotives  while  engaged  in  train  switching 
service  shall  be  included  in  account  No.  392,  "Train  enginemen."  The 
pay  of  enginemen  on  locomotives  engaged  in  work  service  shall  be  in- 
cluded in  the  cost  of  the  work  to  which  the  service  pertains. 

381.  YARD  MOTORMEN. 

This  account  shall  include  the  pay  of  yard  motonnen  while 
engaged  in  switching  service  in  yards  where  regular  switching 
service  is  maintained,  and  in  terminal  switching  and  transfer 
service,  including  pay  of  such  employees  while  deadheading  in 
connection  with  yard  service. 

Note. — The  pay  of  motormen  on  locomotives  engaged  in  more  than 
one  class  of  service  shall  be  apportioned  on  the  basis  of  service  rendered. 
Pay  of  motormen  on  train  locomotives  while  engaged  in  train  switching 
service  shall  be  included  in  account  No.  393,  "Train  motormen."  The 
pay  of  motormen  on  locomotives  engaged  in  work  service  shall  be  in- 
cluded in  the  cost  of  the  work  to  which  the  service  pertains. 

382.  FUEL  FOR  YARD  LOCOMOTIVES. 

This  account  shall  include  the  cost,  delivered  on  locomotive 
tenders,  of  coal,  coke,  oil,  wood,  and  other  fuel  consumed  by 
locomotives  in  switching  service  in  yards  where  regular  switch- 
ing service  is  maintained,  and  in  terminal  switching  and  transfer 
service,  including  a  suitable  proportion  of  the  pay  of  fuel  agents, 
fuel  inspectors,  fuel  weighers,  and  clerks  engaged  in  accounting 
for  fuel  at  fuel  stations;  pay  of  foremen  and  other  fuel-station 


APPENDIX  B  355 

employees;  also  a  suitable  proportion  of  the  cost  of  tools,  such  as 
wheelbarrows,  shovels,  scoops,  and  picks,  used  for  handling 
fuel  at  such  stations,  and  the  cost  of  operating  machinery  at 
fuel  stations. 

Note  A. — The  cost  of  repairs  and  renewals  of  coal  chutes,  buggies, 
I)ockets,  air  hoists,  mechanical  hoists,  and  mechanical  conveyors  at 
fuel  stations  shall  be  charged  to  account  No.  233,  "Fuel  stations." 

Note  B. — The  cost  of  supplies  consumed  by  locomotives  engaged  in 
more  than  one  class  of  service  shall  be  apportioned  upon  the  basis  of 
service  rendered.  The  entire  cost  of  supplies  consumed  by  train  locomo- 
tives in  train  switching  service  shall  be  included  in  the  accounts  pro- 
vided for  train  service.  The  supplies  consumed  by  locomotives  in  work 
service  shall  be  included  in  the  cost  of  the  work  to  which  the  service 
pertains. 

383.  YARD  SWITCHING  POWER  PRODUCED. 

This  account  shall  include  the  cost  of  the  production  and  dis- 
tribution of  electric  power  used  in  operating  locomotives  and 
cars  in  switching  service  in  yards  where  regular  switching 
service  is  maintained,  and  in  terminal  switching  and  transfer 
service. 

Employees. — The  pay  of  employees  engaged  in  operating 
electric-power  stations  and  substations,  such  as  engineers, 
firemen,  electricians,  d3mamo  men,  oilers,  cleaners,  and  coal 
passers. 

Fuel. — ^The  cost  of  coal,  oil,  gas,  and  other  fuel,  including  the 
cost  of  labor  unloading  or  stocking  fuel. 

Water. — ^The  cost  of  water  used  to  produce  steam  or  to  oper- 
ate water  plants,  including  pumping,  rent  of  ponds,  streams,  and 
pipe  lines;  also  water  tests,  boiler  compounds,  and  other  like 
supplies  and  expenses. 

Other  Supplies  and  Expenses.— The  cost  of  lubricants, 
such  as  oil  and  grease  used  in  lubricating  engines,  shafting, 
dynamos,  and  pumps;  cost  of  waste,  carbon  brushes,  fuses, 
lamps,  and  other  supplies;  also  the  cost  of  heating  and  lighting 
power  plants,  and  other  expenses  not  elsewhere  specified  in 
connection  with  operation  of  electric-power  plants.  (See  special 
instructions,  section  12.) 

Note. — The  cost  of  supplies  consumed  by  locomotives  engaged  in 
more  than  one  class  of  service  shall  be  apportioned  upon  the  basis  of 


356  APPENDIX  B 

service  rendered.  The  entire  cost  of  supplies  consumed  by  train  locomo- 
tives in  train  switching  service  shall  be  included  in  the  accounts  provided 
for  train  service.  The  supplies  consumed  by  locomotives  in  work  service 
shall  be  included  in  the  cost  of  the  work  to  which  the  service  pertains. 

384.  YARD  SWITCHING  POWER  PURCHASED. 

This  account  shall  include  the  cost  of  electric  power  pur- 
chased for  the  propulsion  of  engines  and  cars  in  switching  service 
in  yards  where  regular  switching  service  is  maintained,  and  in 
terminal  switching  and  transfer  service. 

Note. — The  cost  of  supplies  consumed  by  locomotives  engaged  in 
more  than  one  class  of  service  shall  be  apportioned  upon  the  basis  of 
service  rendered.  The  entire  cost  of  supplies  consumed  by  train  locomo- 
tives in  train  switching  service  shall  be  included  in  the  accounts  provided 
for  train  service.  The  supplies  consumed  by  locomotives  in  work  service 
shall  be  included  in  the  cost  of  the  work  to  which  the  service  pertains. 

385.  WATER  FOR  YARD  LOCOMOTIVES. 

This  account  shall  include  the  cost  of  water  supplied  to  loco- 
motives in  switching  service  in  yards  where  regular  switching 
service  is  maintained,  and  in  terminal  switching  and  transfer 
service,  including  rent  of  ponds,  lakes,  other  sources  of  water 
supply,  and  right  of  way  for  pipe  lines;  cost  of  water  purchased, 
expenses  of  work  trains  while  engaged  in  hauling  water  for 
locomotive  supply,  and  cost  of  testing  water;  also  cost  of  labor 
expended  and  cost  of  materials  and  supplies  used  in  the  opera- 
tion of  water  stations  and  purif5dng  plants. 

The  cost  of  operating  boilers,  engines,  and  pumps  at  water 
stations;  heating  and  lighting  water  stations,  breaking  ice  in 
water  tanks,  thawing  out  tank  spouts  and  water  cars,  keeping 
fires  in  tanks  and  water  cars  to  prevent  freezing,  shoveling  snow 
into  locomotive  tanks;  also  temporary  connections  between 
water  cars  and  locomotive  tenders,  compounds  injected  into 
locomotive  boilers  to  decrease  scale  formation,  and  other  ex- 
penses directly  incident  to  the  supplying  of  water  to  such  locomo- 
tives, shall  be  included  in  this  account. 

An  equitable  proportion  of  the  pay  and  the  office,  traveling, 
and  other  expenses  of  superintendent  of  water  service  engaged  in 
connection  with  water  supply  for  locomotives  shall  be  included 
in  this  account. 


APPENDIX  B  357 

ITEMS   OF   WATER   STATION   SUPPLIES 

(See  special  instructions,  section  22) 

Axes.  Oil. 

Boiler  compounds.  Rubber  packing. 

Chemicals.  Shovels. 

Coal.  Siphons. 

Coal  picks.  Slice  bars. 

Engine  igniter  batteries.  Stove  fixtures. 

Gasoline.  Stoves. 

Gasoline  drums.  Waste. 

Hand  tools.  Wrenches. 
Hose. 

Note. — The  cost  of  supplies  consumed  by  locomotives  engaged  in 
more  than  one  class  of  service  shall  be  apportioned  upon  the  basis  of 
service  rendered.  The  entire  cost  of  supplies  consumed  by  train  locomo- 
tives in  train  switching  service  shall  be  included  in  the  accounts  provided 
for  train  service.  The  supplies  consumed  by  locomotives  in  work  service 
shall  be  included  in  the  cost  of  the  work  to  which  the  service  pertains. 

386.  LUBRICANTS  FOR  YARD  LOCOMOTIVES. 

This  account  shall  include  the  cost  of  valve,  engine,  car,  and 
other  lubricating  oils,  grease,  compounds,  and  waste  used  for 
lubrication  of  locomotives  in  switching  service  in  yards  where 
regular  switching  service  is  maintained  and  in  terminal  switching 
and  transfer  service. 

Note. — The  cost  of  supplies  consumed  by  locomotives  engaged  in 
more  than  one  class  of  service  shall  be  apportioned  upon  the  basis  of 
service  rendered.  The  entire  cost  of  supplies  consumed  by  train  locomo- 
tives in  train  switching  service  shall  be  included  in  the  accounts  provided 
for  train  service.  The  supplies  consumed  by  locomotives  in  work  service 
shall  be  included  in  the  cost  of  the  work  to  which  the  service  pertains. 

387.  OTHER  SUPPLIES  FOR  YARD  LOCOMOTIVES. 
This  account  shall  include  the  cost  of  supplies,  other  than 

fuel,  water,  and  lubricants,  used  on  locomotives  in  switching 
service  in  yards  where  regular  switching  service  is  maintained 
and  in  terminal  switching  and  transfer  .service,  including  the 
cost  of  repairs  and  renewals  of  furniture,  tools,  and  other  mov- 
able articles  required  for  use  in  locomotives  in  yard  service. 

The  cost  of  sand  charged  to  this  account  shall  include  the 
cost  of  material  and  supplies  used  in  preparing  and  diying  the 
sand  for  use,  such  as  the  cost  of  fuel,  wheelbarrows,  shovels,  and 
sand  screens. 


358 


APPENDIX  B 


ITEMS   OF   TOOLS   AND    SUPPLIES 

(See  special  instructions,  section  22) 


Asb  hoes. 

Ash-pan  rods. 

Axes, 

Bars,  buggy. 

Bell  cords. 

Boxes,  portable. 

Brooms. 

Brushes. 

Buckets. 

Carbide  for  acetylene  gas. 

Carbons  for  electric  lights. 

Chimneys  for  headlights. 

Chimneys  for  signal  lamps. 

Chisels. 

Clinker  hooks. 

Crowbars. 

Files. 

First-aid  boxes. 

Flags. 

Globes  for  lanterns. 

Grate  shakers. 

Hammers. 

Handsaws. 

Hatchets. 

Hose  (not  air-brake,  air-signal,  or 

steam). 
Hose,  thaw-out. 
Hose  reels. 
Ice. 
Jacks. 
Jackscrews. 
Lanterns  and  parts. 
Locks  for  portable  boxes. 
Matches. 
Oil  cans. 


Oil  for  headUghts. 

Oil  for  lanterns. 

Oil  for  signal  lamps. 

Oil  for  torches. 

Oilers. 

Packing  hooks. 

Packing  spoons. 

Picks,  coal. 

Pinch  bars. 

Plugging  bars. 

Pokers. 

Sand. 

Saws. 

Scoops. 

Shovels. 

Signal  lamps. 


Slice  bars. 

Soap. 

Switch  chains. 

Switch  poles. 

Switch  ropes. 

Tool  boxes,  portable. 

Torches. 

Torpedoes. 

Waste. 

Water  buckets. 

Water  coolers. 

Wicks  for  headlights. 

Wicks  for  lanterns. 

Wicks  for  signal  lamps. 

Wicks  for  torches. 

Wrecking  frogs. 

Wrenches. 


Note  A. — Where  the  quantity  of  sand  used  on  locomotives  engaged 
in  yard  service  is  relatively  small  as  compared  with  the  quantity  used 
by  locomotives  engaged  in  train  service,  the  entire  cost  of  such  material 
shall  be  included  in  account  No.  399,  "Other  supplies  for  train  locomo- 
tives." Where  the  quantity  used  in  yard  service  is  relatively  large,  the 
entire  cost  shall  be  included  in  this  account. 

Note  B. — The  cost  of  other  supplies  consumed  by  locomotives  en- 
gaged in  more  than  one  class  of  service  shall  be  apportioned  upon  the 
basis  of  service  rendered.  The  entire  cost  of  supplies  consumed  by  train 
locomotives  in  train  switching  service  shall  be  included  in  the  accounts 
provided  for  train  service.  The  supplies  consumed  by  locomotives  in 
work  service  shall  be  included  in  the  cost  of  the  work  to  which  the  service 
pertains. 


APPENDIX  B  359 

388.  ENGINEHOUSE  EXPENSES— YARD. 

This  account  shall  include  the  expense  of  caring  for  and  pre- 
paring locomotives  for  switching  service  in  yards  where  regular 
switching  service  is  maintained  and  in  terminal  switching  and 
transfer  service,  including  a  proportion  of  such  expenses  as  are 
common  to  train,  yard  switching,  and  work  service. 

Enginehouse  Men. — The  pay  of  enginehouse  employees 
engaged  in  wiping,  cleaning,  watching,  and  dispatching  locomo- 
tives; keeping  and  preparing  fires,  dumping  ashes,  washing 
boilers,  cleaning  fire  boxes,  packing  driving  boxes  and  truck 
boxes;  cleaning  smokestacks,  air-brake  equipment,  and  front 
ends  of  locomotives;  checking  locomotive  tool  equipment,  clean- 
ing ash  and  cinder  pits;  operating  turntables,  drying  sand,  in- 
specting smokestacks  and  ash  pans;  calling  enginemen;  and 
moving  locomotives  around  engine  yards  when  operated  by 
hostlers;  also  a  proportion  of  the  pay  of  enginehouse  foremen 
and  their  clerks. 

Miscellaneous  Expenses. — The  cost  of  tools,  supplies,  and 
sundry  expenses  on  account  of  caring  for  and  preparing  locomo- 
tives at  enginehouses. 

ITEMS   OF  MISCELLANEOUS   EXPENSES 

(See  special  instructions,  section  22) 

Boiled  oil.  Lye. 

Compounds  for  cleaning  and  pol-  Packing  tools. 

ishing.  Paint  for  front  ends  of  locomotives. 

Enginehouse  cupboards.  Power  for  operation  of  turntables 
Gas,  oil,  and  electricity  for  light-  and  transfer  tables. 

ing.  Rent  of  roundhouse  stalls. 

Heating    enginehouses,    including  Shovels. 

offices.  Signal  lights  on  transfer  tables  and 
Lampblack.  turntables. 

Lanterns    used     by    enginehouse  Waste. 

men.  Water  for  cinder  pits. 

Lighting    enginehouses,    including  Water  for  washing  boilers. 

offices.  Water  hose. 

Lubricating    oil    for    enginehouse,  Wheelbarrows. 

ash  pit,  transfer  table,  and  turn- 
table machinery. 

Note  A. — Enginehouse  expenses  of  locomotives  in  work  service  shall 
be  included  in  the  cost  of  the  work  to  which  the  service  pertains. 

Note  B. — The  pay  of  mechanics  and  laborers  engaged  in  locomotive 
repair  work  in  enginehouses  shall  be  charged  to  the  appropriate  accounts 
for  locomotive  repairs. 


360  APPENDIX  B 

389.  YARD  SUPPLIES  AND  EXPENSES. 

This  account  shall  include  the  cost  of  supplies  (except  locomo- 
tive supplies,  used  in  yard  service,  yard  signal  and  interlocker 
supphes,  and  miscellaneous  yard  expenses  for  yards  where 
regular  switching  service  is  maintained;  also  office  and. other 
expenses  of  employees  whose  pay  is  chargeable  to  accounts 
Nos.  377,  378,  and  379. 

ITEMS   OF  TARD    SUPPLIES 

(See  special  instructions,  section  22) 

Electric-light  carbons.  Lubricants    for    machinery    and 

Electric-light  globes.  switches. 

Flags.  Semaphore  lamps. 

Fuel  for  heating.  Signal  lamps. 

Fuel  for  power.  Stoves. 

Illuminating  oil.  Switch  chains. 

Lamp  burners.  Switch  lamps. 

Lamp  chimneys.  Switch  ropes. 

Lamp  wicks.  Waste. 

Lantern  globes.  Wrecking  frogs. 

Lantern  wicks.  Wrecking  wedges. 

Lanterns. 

ITEMS   OF   YARD    EXPENSE 

(See  special  instructions,  section  22) 

Electricity  purchased  for  lighting  Power    purchased    for    operating 

yards  and  yard  buildings.  switches  and  signals. 

Furniture  repairs  and  renewals.  Rent  of  telephones. 

Gas  purchased  for  lighting  yards  Rent  of  yard  buildings  (not  jointly 

and  yard  buildings.  used). 

Power     produced     for     operating 
switches  and  signals. 

390.  OPERATING  JOINT  YARDS  AND  TERMINALS— DR. 
This  account  shall  include  the  carrier's  proportion  of  the 
costs  incurred  by  others  in  their  operation  of  joint  yards  and 
terminals,  including  signals,  interlockers,  and  other  facihties  at 
such  jouit  yards  and  terminals. 

Note  A. — The  purpose  of  this  account  is  to  show  the  amounts  accruing 
against  the  carrier  for  its  proportion  of  the  cost  of  operating  yards  and 
terminals  operated  by  others,  and  in  the  joint  use  of  which  the  carrier 
participates.     (See  special  instructions,  section  9.) 

Note  B. — No  proportions  of  items  of  expense  chargeable  by  the  operat- 
ing carrier  to  accounts  Nos.  392  to  402,  inclusive,  shall  be  included  in 
thia  account. 


APPENDIX  B  361 

391.  OPERATING  JOINT  YARDS  AND  TERMINALS— CR. 

This  account  shall  include  amounts  chargeable  to  others  as 
their  proportions  of  the  costs  incurred  by  the  carrier  in  the  opera- 
tion of  joint  yards  and  terminals,  including  signals,  interlockers, 
and  other  facilities  at  such  joint  yards  and  terminals. 

Note  A. — The  purpose  of  this  account  is  to  show  the  amounts  ac- 
cruing in  favor  of  the  carrier  and  against  others  for  their  proportions  of 
the  cost  of  operating  yards  and  terminals  operated  by  the  carrier  and 
in  the  joint  use  of  which  others  participate.  (See  special  instructions, 
section  9.) 

Note  B. — No  proportions  of  items  of  expense  chargeable  by  the  oper- 
ating carrier  to  accounts  Nos.  392  to  402,  inclusive,  shall  be  included 
in  this  account. 

392.  TRAIN  ENGINEMEN. 

This  account  shall  include  the  pay  of  steam  locomotive  en- 
gineers and  firemen  while  engaged  in  transportation  train  service 
or  while  deadheading  in  connection  therewith  and  pay  of  such 
enginemen  engaged  in  piloting  trains  over  home  lines;  also  the 
pay  of  employees  while  regularly  engaged  in  shoveling  coal 
forward  on  locomotive  tenders. 

Note. — The  pay  of  enginemen  on  locomotives  engaged  in  more  than 
one  class  of  service  shall  be  apportioned  on  the  basis  of  service  rendered. 
Pay  of  enginemen  on  train  locomotives  while  engaged  in  train  switch- 
ing service  shall  be  included  in  this  account."  The  pay  of  enginemen  on 
locomotives  engaged  in  work  service  shall  be  included  in  the  cost  of  the 
work  to  which  the  service  pertains.  —  - 

393.  TRAIN  MOTORMEN. 

This  account  shall  include  the  pay  of  motormen  while  en- 
gaged in  running  other  than  steam  locomotives  and  cars  in 
transportation  train  service  or  while  deadheading  in  connection 
therewith;  also  the  pay  and  expenses  of  motormen  while  engaged 
in  piloting  trains  or  cars  over  home  lines. 

Note. — The  pay  of  motormen  on  locomotives  engaged  in  more  than 
one  class  of  service  shall  be  apportioned  on  the  basis  of  service  rendered. 
Pay  of  motormen  on  train  locomotives  while  engaged  in  train  switching 
service  shall  be  included  in  this  account.  The  pay  of  motormen  on 
locomotives  engaged  in  work  service  shall  be  included  in  the  cost  of  the 
work  to  which  the  service  pertains. 

394.  FUEL  FOR  TRAIN  LOCOMOTIVES. 

This  account  shall  include  the  cost,  delivered  on  locomotive 
tenders,  of  coal,  coke,  oil,  wood,  and  other  fuel  consumed  by 


862  APPENDIX  B 

locomotives  in  transportation  train  service,  including  a  suitable 
proportion  of  the  pay  of  fuel  agents,  fuel  inspectors,  fuel  weighers, 
and  clerks  engaged  in  accounting  for  fuel  at  fuel  stations;  pay 
of  foremen  and  other  fuel  station  employees;  also  a  suitable  pro- 
portion of  the  cost  of  tools,  such  as  wheelbarrows,  shovels, 
scoops,  and  picks,  used  for  handling  fuel  at  such  stations,  and 
the  cost  of  operating  machinery  at  fuel  stations. 

Note  A. — The  cost  of  repairs  and  renewals  of  coal  chutes,  buggies, 
pockets,  air  hoists,  mechanical  hoists,  and  mechanical  conveyors  shall 
be  charged  to  account  No.  233,  "Fuel  stations." 

Note  B. — The  entire  cost  of  supplies  consumed  by  train  locomotives 
in  train  switching  service  shall  be  included  in  the  accounts  provided  for 
train  service.  The  supplies  consumed  by  locomotives  in  work  service 
shall  be  included  in  the  cost  of  the  work  to  which  the  service  pertains. 

395.  TRAIN  POWER  PRODUCED. 

This  account  shall  include  the  cost  of  producing  and  distribut- 
ing electric  power  for  the  propulsion  of  electric  locomotives  and 
cars  in  transportation  train  service. 

Employees. — The  pay  of  employees  engaged  in  operating 
electric-power  stations  and  substations,  such  as  engineers, 
j&remen,  electricians,  dynamo  men,  oilers,  cleaners,  and  coal 


Fuel. — The  cost  of  coal,  oil,  gas,  and  other  fuel,  including  the 
cost  of  labor  unloading  or  stocking  fuel. 

Water. — The  cost  of  water  used  to  produce  steam  or  to 
operate  water  plants,  including  pumping,  rent  of  ponds,  streams, 
and  pipe  lines;  also  water  tests,  boiler  compounds,  and  other 
like  supplies  and  expenses. 

Other  Supplies  and  Expenses. — The  cost  of  lubricants, 
such  as  oil  and  grease,  used  in  lubricating  engines,  shafting, 
dynamos,  and  pumps;  cost  of  waste,  carbon  brushes,  fuses, 
lamps,  and  other  supplies;  also  cost  of  heating  and  lighting 
power  plants,  and  other  expenses  not  elsewhere  specified  in  con- 
nection with  operation  of  electric-power  plants.  (See  special 
instructions,  section  12.) 

Note. — The  entire  cost  of  supplies  consumed  by  train  locomotives  in 
train  switching  service  shall  be  included  in  the  accounts  provided  for 
train  service.  The  supplies  consumed  by  locomotives  in  work  service 
shall  be  included  in  the  cost  of  the  work  to  which  the  service  pertaina. 


APPENDIX  B  363 

396.  TRAIN  POWER  PURCHASED. 

This  account  shall  include  the  cost  of  electric  power  purchased 

for  the  propulsion  of  locomotives  and  cars  in  transportation 

train  service. 

Note. — The  entire  cost  of  supplies  consumed  by  train  locomotives  in 
train  switching  service  shall  be  included  in  the  accounts  provided  for 
train  service.  The  supplies  consumed  by  locomotives  in  work  service 
shall  be  included  in  the  cost  of  the  work  to  which  the  service  pertains. 

397.  WATER  FOR  TRAIN  LOCOMOTIVES. 

This  account  shall  include  the  cost  of  water  supplied  to  locomo- 
tives in  transportation  train  service,  including  rent  of  ponds, 
lakes,  other  sources  of  water  supply,  and  right  of  way  for  pipe 
lines;  cost  of  water  purchased,  expenses  of  supply  trains  while  en- 
gaged in  hauling  water  for  locomotive  supply,  and  cost  of  testing 
water;  also  cost  of  labor  expended  and  cost  of  material  and  sup- 
pUes  used  in  the  operation  of  water  stations  and  purifying  plants. 

The  cost  of  operating  boilers,  engines,  and  pumps  at  water 
stations,  heating  and  lighting  water  stations,  breaking  ice  in 
water  tanks,  thawing  out  tank  spouts  and  water  cars,  keeping 
fires  in  tanks  and  water  cars  to  prevent  freezing,  shoveling  snow 
into  locomotive  tanks;  also  temporary  connections  between 
water  cars  and  locomotive  tenders,  compounds  injected  into 
locomotive  boilers  to  decrease  scale  formation,  and  other  ex- 
penses directly  incident  to  the  supplying  of  water  to  such  locomo- 
tives, shall  be  included  in  this  account. 

An  equitable  proportion  of  the  pay  and  the  oj0fice,  traveling, 
and  other  expenses  of  superintendent  of  water  service,  engaged 
in  connection  with  water  supply  for  locomotives,  shall  be  in- 
cluded in  this  account. 

ITEMS   OF   WATER   STATION   SUPPLIES 

(See  special  instructions,  section  22) 

Axes.  Oil. 

Boiler  compounds.  Rubber  packing. 

Chemicals.  Shovels. 

Coal.  Siphons. 

Coal  picks.  Slice  bars. 

Engine  igniter  batteries.  Stove  fixtures. 

Gasoline.  Stoves. 

Gasoline  drums.  Waste. 

Hand  tools.  Wrenchea, 
Hose. 


364 


APPENDIX  B 


Note. — The  entire  cost  of  supplies  consumed  by  train  locomotives  in 
train  switching  service  shall  be  included  in  the  accounts  provided  for 
train  service.  The  supplies  consumed  by  locomotives  in  work  service 
shall  be  included  in  the  cost  of  the  work  to  which  the  service  pertains. 

398.  LUBRICANTS  FOR  TRAIN  LOCOMOTIVES. 

This  account  shall  include  the  cost  of  valve,  engine,  car,  and 
other  lubricating  oils,  grease,  compounds,  and  waste  used  for 
lubrication  of  locomotives  in  transportation  train  service. 

Note. — The  entire  cost  of  supplies  consumed  by  train  locomotives  in 
train  switching  service  shall  be  included  in  the  accounts  provided  for 
train  service.  The  supplies  consumed  by  locomotives  in  work  service 
shall  be  included  in  the  cost  of  the  work  to  which  the  service  pertains. 

399.  OTHER  SUPPLIES  FOR  TRAIN  LOCOMOTIVES. 

This  account  shall  include  the  cost  of  supplies  other  than  fuel, 
water,  and  lubricants,  including  the  cost  of  repairs  and  renew^als 
of  furniture,  tools,  and  other  movable  articles  required  for  use 
on  locomotives  in  transportation  train  service. 

The  cost  of  sand  charged  to  this  account  shall  include  the  cost 
of  material  and  supplies  used  in  preparing  and  drying  the  sand 
for  use,  such  as  the  cost  of  fuel,  wheelbarrows,  shovels,  and  sand 
screens. 

ITEMS   OF   TOOLS  AND   SUPPLIES 

(See  special  instructions,  section  22) 


Ash  hoes. 

Ash-pan  rods. 

Axes. 

Bars,  buggy. 

Bell  cords. 

Boxes,  portable. 

Brooms. 

Brushes. 

Buckets. 

Carbide  for  acetylene  gas. 

Carbons  for  electric  lights. 

Chimneys  for  headlights. 

Chimneys  for  signal  lamps. 

Chisels. 

Clinker  hooks. 

Crowbars. 

Files. 

First-aid  boxes. 

Flags. 

Globes  for  lanterns. 

Gr^ite  shakers. 


Hammers. 

Handsaws, 

Hatchets. 

Hose  (not  air-brake,  air-signal,  or 

steam). 
Hose,  thaw-out. 
Hose  reels. 
Ice. 
Jacks. 
Jackscrews. 
Lanterns  and  parts. 
Locks  for  portable  boxes. 
Matches. 
Oil  cans. 

Oil  for  headUghts. 
Oil  for  lanterns. 
Oil  for  signal  lamps. 
Oil  for  torches. 
Oilers. 

Packing,  fiber. 
Packing,  rubber. 


APPENDIX  B  365 

Packing  hooki.  Switch  poles. 

Packing  spoons.  Switch  ropes. 

Picks,  coal.  Tool  boxes,  portable. 

Pinch  bars.  Torches. 

Plugging  bars.  Torpedoes. 

Pokers.  Waste. 

Sand.  Water  buckets. 

Saws.  Water  coolers. 

Scoops.  >>  ■  Wicks  for  headlights. 

Shovels.  Wicks  for  lanterns. 

Signal  lamps.  Wicks  for  signal  lamps. 

Sledges.  Wicks  for  torches. 

Slice  bars.  Wrecking  frogs. 

Soap.  Wrenches. 
Switch  chains. 

Note  A. — Where  the  quantity  of  sand  used  on  locomotives  engaged 
in  train  service  is  relatively  small  as  compared  with  the  quantity  used 
by  locomotives  engaged  in  yard  service,  the  entire  cost  of  such  material 
shall  be  included  in  account  No.  387,  "Other  supplies  for  yard  locomo- 
tives." Where  the  quantity  used  in  train  service  is  relatively  large,  the 
entire  cost  shall  be  included  in  this  account. 

Note  B. — The  entire  cost  of  supplies  consumed  by  train  locomotives 
in  train  switching  service  shall  be  included  in  the  accounts  provided  for 
train  service.  The  supplies  consumed  by  locomotives  in  work  service 
shall  be  included  in  the  cost  of  the  work  to  which  the  service  pertains. 

400.  ENGINEHOUSE  EXPENSES— TRAIN. 

This  account  shall  include  the  expense  of  caring  for  and  pre- 
paring locomotives  for  transportation  train  service,  including  a 
proportion  of  such  expenses  as  are  common  to  train,  yard  switch- 
ing, and  work  service. 

Enginehouse  Men. — ^The  pay  of  enginehouse  employees 
engaged  in  wiping,  cleaning,  watching,  and  dispatching  locomo- 
tives; preparing  and  keeping  fires,  dumping  ashes,  washing 
boilers,  cleaning  fire  boxes,  packing  driving  boxes  and  truck 
boxes;  cleaning  smokestacks,  air-brake  equipment,  and  front 
ends  of  locomotives;  checking  locomotive  tool  equipment, 
cleaning  ash  and  cinder  pits;  operating  turntables,  drying  sand, 
inspecting  smokestacks  and  ash  pans;  and  moving  locomotives 
around  engine  yards  when  operated  by  hostlers;  also  a  propor- 
tion of  the  pay  of  enginehouse  foremen  and  their  clerks. 

Miscellaneous  Expenses. — ^The  cost  of  tools  and  supplies 
and  sundrj^  expenses  on  account  of  caring  for  and  preparing 
locomotives  at  enginehouses. 


366  APPENDIX  B 

ITEMS   OP  MISCELLANEOUS   EXPENSES 

(See  special  instructions,  section  22) 

Boiled  oil.  Paint  for  front  ends  of  locomotives. 

Compounds  for  cleaning  and  pol-  Power  for  operation  of  turntables 

ishing.  and  transfer  tables. 

Gas,  oil,  and  electricity  for  lighting.  Rent  of  roundhouse  stalls. 

Heating    enginehouses,    including  Shovels. 

offices.  Signal  lights  on  transfer  tables  and 

Lampblack.  turntables. 

Lanterns  used  by  enginehouse  men.  Waste. 

Lighting    enginehouses,    including  Water  for  cinder  pits. 

offices.  Water  for  washing  boilers. 

Lubricating  oil.              •  Water  hose. 

Lye.  Wheelbarrows. 
Packing  tools. 

Note  A. — Enginehouse  expenses  of  locomotives  in  work  service  shall 
be  included  in  the  cost  of  the  work  to  which  the  service  pertains. 

Note  B. — The  pay  of  mechanics  and  laborers  engaged  in  locomotive 
repair  work  in  enginehouses  shall  be  charged  to  the  appropriate  accounts 
for  locomotive  repairs. 

401.  TRAINMEN. 

This  account  shall  include  the  pay  of  conductors;  of  train 
auditors,  ticket  collectors,  and  others  engaged  in  lifting  or  ex- 
amining authorities  for  transportation;  and  of  baggagemen, 
brakeman,  flagmen,  train  porters,  train  guards,  train  stenog- 
raphers, maids,  and  other  train  employees  while  engaged  in 
transportation  train  service  or  while  deadheading  in  connection 
therewith;  also  the  pay  of  trainmen  while  engaged  in  piloting 
trains  over  home  lines. 

Note. — The  pay  of  trainmen  while  engaged  in  work-train  service 
shall  be  included  in  the  cost  of  the  work  to  which  the  service  pertains. 

402.  TRAIN  SUPPLIES  AND  EXPENSES. 

This  account  shall  include  miscellaneous  expenses  of  transpor- 
tation service  trains  and  the  cost  of  all  supplies  other  than  loco- 
motive supplies. 

Cleaning  Cars. — The  cost  of  cleaning  and  disinfecting  pas- 
senger and  freight  cars  in  transportation  train  service,  including 
cost  of  removing  from  freight-train  cars  such  refuse  material 
^  sawdust,  hay,  and  straw, 


APPENDIX  B  367 

ITEMS   OF   SERVICE   AND   SUPPLIES 

(See  special  instructions,  section  22) 

Brooms.  Hose  and  fixtures. 

Brushes.  Labor  of  employees. 

Cleaning  compounds.  Polishing  compounds. 

Compressed  air.  Soap. 

Disinfectants.  Sponges. 

Disinfecting  machines.  Water. 
Fuel  for  heating  water. 

Heating  Cars. — ^The  cost  of  heating  cars  in  transportation 
train  service,  including  cost  of  operating  steam-heating  plants 
for  car  heating  at  stations  and  yards. 

ITEMS   OF   SERVICE   AND   SUPPLIES 

(See  special  instructions,  section  22) 
Connections  between  steam  heat-       Labor  of  employees, 

ing  lines  and  cars.  Removal  of  ashes  from  car  stoves. 

Fuel.  Stoves  temporarily  in  freight  cars. 

Lighting  Cars. — ^The  cost  of  lighting  cars  in  transportation 
train  service,  including  the  cost  of  filling  and  cleaning  lamps  and 
of  operating  plants  for  supplying  gas  or  electricity  for  lighting 
purposes. 

ITEMS   OF   SERVICE    AND    SUPPLIES 

(See  special  instructions,  section  22) 
Battery  renewals.  Hose  and  connections. 

Candles.  Incandescent  lamp  bulbs. 

Chimneys.  Labor  of  employees. 

Electricity.  Lamp  carbons. 

Gas.  Oil. 

Gas  mantles.  Shades. 

Globes.  Wicks. 

Note. — Repairs  of  gas  lighting  and  electric  lighting  plants  shall  be 
included  in  the  proper  maintenance  accounts.  Repairs  and  renewals 
of  electric  lighting  equipment  of  cars,  except  supplies  as  above  provided, 
shall  be  included  in  the  appropriate  car-repair  account. 

Lubricating  Cars. — The  cost  of  lubricating  cars  in  transpor- 
tation train  service,  including  cost  of  inspecting,  repacking,  and 
oiUng  car  journal  boxes  and  air-brake  equipment. 
items  of  service  and  supplies 
(See  special  instructions,  section  22) 
Cotton  waste.  Packing  buckets. 

Grease  buckets.  Packing  hooks. 

Labor  of  employees.  Packing  irons. 

Oil  cans.  Packing,  miscellaneous. 

Oil,  grease,  and  other  lubricants.  Wool  waste. 


368 


APPENDIX  B 


Icing  and  Watering  Cars. — The  cost  of  icing  and  watering 
cars  in  transportation  train  service,  including  icing  cars  for  re- 
frigeration purposes.  Credits  shall  be  made  to  this  account  for 
refrigeration  charges  collection  from  other  companies  and  in- 
dividuals. 

ITEMS    OF   SERVICE    AND    SUPPLIES 

(See  special  instructions,  section  22) 
Buckets.  Labor  of  employees. 

Hose  and  fixtures.  Ladders. 

Ice.  Salt. 

Ice  tools.  Water. 

Detouring  Trains. — The  compensation  for  temporary  use  of 
tracks  of  other  carriers,  including  the  cost  of  pilot  service,  on  ac- 
count of  wrecks,  washouts,  landshdes,  snow  blockades,  and  other 
defects  of  the  tracks,  bridges,  or  tunnels  on  the  carrier's  line. 

Train  Supplies. — The  cost  of  suppUes  furnished  for  use  on 
cars  in  transportation  train  service. 

ITEMS   OF  TRAIN   SUPPLIES 

(See  special  instructions,  section  22) 
Medical  boxes. 


Axes. 
Badges. 
Beds. 
Bell  cords. 
Boxes  for  trainmen. 
Brooms. 
Brushes. 
Chains. 

Chairs    for    cabooses     (not    per- 
manently attached). 
Cold  chisels. 
Combs. 

Conductors'  punches. 
Cuspidors. 

Drinking  cups  and  glasses. 
Fire  buckets. 
Flags. 
Fuses. 
Hammers. 
Hatchets. 
Jacks. 

Lamp  boards. 
Lamp  sticks. 
Lantern  globes. 
Lantern  parts. 
Lanterns. 
Matches. 


Oil  for  lanterns. 

Order  hoops. 

Padlocks. 

Pails. 

Punches. 

Sawdust. 

Saws. 

Scoops. 

Shovels. 

Signal  boxes. 

Signal  lamps  (rear). 

Sledges. 

Soap. 

Switch  chains. 

Switch  ropes. 

ToUet  paper. 

Torpedoes. 

Towels. 

Train  tool  boxes. 

Uniform  trimmings. 

Uniforms. 

Ventilator  sticks. 

Waste. 

Water  buckets. 

Wrecking  frogs. 

Wrenches. 


APPENDIX  B  369 

Other  Expenses. — ^The  cost  of  miscellaneous  supplies  re- 
quired to  equip  trains  for  transportation  service  and  miscel- 
laneous expenses  incident  to  operation  of  such  trains. 

ITEMS   OP   EXPENSE   ON  ACCOUNT   OF   EMPLOYEES 

(See  special  instructions,  section  22) 
Apparatus  for  testing  the  sight  and  hearing  of  enginemen  and  trainmen. 
Employees'  reading  and  bunk  room  expense,  including  pay  of  at- 
tendants and  supplies  furnished. 
Laundry  work. 

Physicians'  fees  for  examination  of  train  employees. 
Wages  paid  to  superintendents  and  secretaries  of  reading  rooms. 

ITEMS    OF   EXPENSE    ON   ACCOUNT   OF   TRAN8POBTATION 

(See  special  instructions,  section  22) 

Bedding  for  stock  cars. 

Boarding  and  slatting  box  and  stock  cars  for  carrying  coal,  coke,  and 
other  freight. 

Boards  for  flooring  fruit  cars. 

Chains  for  securing  loads. 

Cleaning,  trimming,  and  filling  trainmen's  lanterns  and  rear  signal 
lamps. 

Coupling  and  uncoupling  cars  at  terminals. 

Disinfecting  cars. 

Dunnage  used  in  loading  cars  or  fitting  cars  for  freight  shipments. 

Feed  for  live  stock  in  snow-bound  or  otherwise  delayed  trains. 

Flowers  and  plants  for  cars. 

Laundry  for  revenue  service  cars  other  than  for  dining  and  buffet 
service  and  sleeping  car  service. 

Occasional  turning  of  engines  on  Y  of  other  carriers. 

Oil  and  other  supplies  for  locomotives  hauled  as  freight. 

Periodicals  for  use  of  passengers  on  trains. 

Planking  cars  for  billet  shipments  and  other  material. 

Provisions,  supplies,  or  board  for  passengers  in  delayed  trains. 

Remo\'ing  advertisements  from  cars. 

Rent  of  fare  registers  in  cars. 

Safety  chains  for  use  between  twin  and  triple  cars. 

Supplies  for  parlor  and  chair  cars. 

Supplies  furnished  cars  for  the  purpose  of  protection  against  accidents 
and  fires. 

Temporary  grain  doors. 

Temporary  lining  of  cars  for  freight  shipments  and  stoves  and  heaters 
to  prevent  freezing. 

Temporary  openings  in  cars  for  freight  shipments. 

Temporary  racking  of  cars  for  handling  sugar-cane,  corn,  bark,  or 
cord  wood. 

Transferring  passengers,  express  matter,  baggage,  mail,  and  freight 
on  account  of  defective  tracks,  bridges,  or  tunnels. 

Note. — The  expenses  of  operating  sleeping,  dining,  and  buffet  car 
features  of  train  service  shall  be  included  in  the  account  No.  403,  "Oper- 


^70  APPENDIX  B 

ating  sleeping  cars,"  or  in  account  No.  441,  '"  Dining  and  buffet  service," 
as  may  be  appropriate. 

403.  OPERATING  SLEEPING  CARS. 

This  account  shall  include  the  cost  of  operating  sleeping  car 
service  on  trains. 

Superintendence. — The  pay  of  officers  directly  in  charge 
of  operating  sleeping  car  service;  the  pay  of  their  clerks  and 
office  attendants;  also  the  office,  traveling,  and  other  expenses 
of  such  officers  and  employees. 

Station  Employees. — The  pay  and  expenses  of  local  agents, 
ticket  agents,  cashiers,  clerks,  and  attendants;  also  the  office 
and  other  expenses  of  such  employees. 

Station  Expenses. — The  expenses  of  fuel,  water,  steam,  and 
supplies  used  in  heating  station  offices;  gas,  oil,  electric  current, 
and  other  supplies  for  lighting;  repairs  and  renewals  of  station 
furniture,  and  all  other  station  expenses  connected  with  sleeping 
car  service  when  separable  from  the  station  expenses  chargeable 
to  account  No.  376,  ''Station  supplies  and  expenses." 

Conductors. — ^The  pay  of  conductors  employed  on  sleeping 
cars. 

Porters  and  Maids. — The  pay  of  porters  and  maids  em- 
ployed on  sleeping  cars. 

Car  Supplies. — The  cost  of  miscellaneous  supplies  used  on 
sleeping  cars,  such  as  combs,  brushes,  brooms,  and  toilet  paper; 
also  uniforms,  caps,  and  service  stripes  for  employees. 

Laundry. — Expenses  for  laundry  work,  such  as  laundering 
sheets,  pillowcases,  towels,  blankets,  etc. 

Other  Expenses. — The  cost  of  flowers  and  plants,  heating 
cars,  cleaning  the  interior  of  cars,  and  of  supplies  used  in  interior 
cleaning,  rent  and  cost  of  supplies  for  rooms  furnished  for  sleep- 
ing car  service  employees,  and  such  other  expenses  in  connection 
with  the  operation  of  sleeping  cars  as  are  not  provided  for  else- 
where. 

Note. — When  officers  have  immediate  supervision  over  sleeping  car 
service  and  other  operations  their  pay,  office,  and  other  expenses,  as 
also  the  pay,  office,  and  other  expenses  of  their  assistants,  clerks,  and 
office  attendants,  shall  be  equitably  apportioned  to  the  accounts  appro- 
priate to  the  operations  over  which  they  have  supervision. 


APPENDIX  B  371 

404.  SIGNAL  AND  INTERLOCKER  OPERATION. 

This  account  shall  include  the  cost  of  operating  signals  and 
interlockers  other  than  those  solely  or  principally  used  for  govern- 
ing all  movements  of  locomotives  and  trains  between  main  and 
yard  tracks,  movements  of  locomotives  between  yard  tracks 
and  enginehouses,  and  yard  switching  movements. 

Labor. — The  wages  of  employees  engaged  in  operating  signals 
and  interlockers  or  power  producing  plants  in  connection  there- 
with, such  as  switch  tenders,  signalmen  other  than  telegraph 
operators,  lever  men,  switch  and  signal  oilers,  battery  men, 
lamp  men,  lamp  cleaners,  and  lamplighters;  gatemen  at  cross- 
ings of  other  railroads,  engineers  and  others  operating  plants 
furnishing  compressed  air  for  signals  and  interlockers;  engineers, 
electricians,  and  others  operating  plants  furnishing  electric 
power  for  signals  and  interlockers. 

Supplies. — The  cost  of  supplies  used  in  operating  signals  and 
interlockers  or  in  signal  offices,  such  as  gasoUne,  vitriol,  battery 
zincs,  battery  coppers,  lubricating  oils,  fuel  for  heating,  fuel  for 
power  purposes,  produced  and  purchased  power  used  in  operat- 
ing switches  and  signals,  furniture  repairs  and  renewals,  water, 
and  light. 

Note. — The  cost  of  operating  signals  and  interlockers  solely  or  prin- 
cipally used  for  governing  the  movement  of  yard  locomotives  and  trains 
shall  be  included  in  the  appropriate  yard  expense  accounts. 

405.  CROSSING  PROTECTION. 

This  account  shall  include  the  pay  of  street  and  highway  cross- 
ing gatekeepers  and  flagmen,  the  cost  of  supplies  used  by  them, 
the  cost  of  lights  at  street  and  highway  crossings  not  a  part  of 
the  lighting  outfit  at  stations  or  in  yards,  and  the  cost  of  com- 
pressed air  for  operating  gates. 

406.  DRAWBRIDGE  OPERATION. 

This  account  shall  include  the  cost  of  operating  drawbridges. 

Labor. — The  wages  of  employees  engaged  in  operating  draw- 
bridges, such  as  bridge  engineers,  tenders,  and  watchmen. 

Supplies. — The  cost  of  produced  and  purchased  power  and 
of  supplies,  such  as  fuel,  oil,  lanterns,  water,  waste,  boats, 
stoves,  chairs,  brooms,  and  pails  used  in  drawbridge  operation. 


372  APPENDIX  B 

407.  TELEGRAPH  AND  TELEPHONE  OPERATION. 

This  account  shall  include  the  cost  of  telegraph  and  telephone 
operation  not  provided  for  elsewhere. 

Superintendence — Telegraph. — ^The  pay  of  superintend- 
ents of  telegraph,  telegraph  censors,  their  clerks,  and  attendants. 

Telegraph  Operators  and  Messengers. — The  pay  of 
telegraph  operators,  block  inspectors,  and  messengers  in  tele- 
graph and  relay  offices  other  than  those  employed  in  dispatching 
trains  and  those  located  in  general  offices  or  at  stations. 

Other  Telegraph  Expenses. — Office,  travelmg,  and  inci- 
dental expenses,  including  office  rent,  of  employees  whose  pay  is 
chargeable  to  this  account;  rent  of  telegraph  conduits,  lines, 
and  poles;  cost  of  battery  renewals  and  supphes,  bicycles  for 
messengers,  and  electric  current  for  telegraph  purposes;  also 
excess  payments  to  telegraph  companies  when  in  connection 
with  telegraph  service  and  not  provided  for  elsewhere. 

Note  A. — The  pay,  rent,  other  office  expenses,  and  traveling  expenses 
of  superintendents  of  telegraph,  their  assistants,  clerks,  and  attendants, 
when  engaged  both  in  maintaining  and  operating  telegraph  lines  shall 
be  apportioned  equally  between  this  account  and  account  No.  247, 
"Telegraph  and  telephone  lines." 

Superintendence — ^Telephone. — The  pay  of  superintend- 
ents of  telephone,  their  clerks,  and  attendants. 

Telephone  Operators  and  Messengers. — The  pay  of 
telephone  operators  and  messengers  in  telephone  offices  other 
than  those  employed  in  dispatching  trains  and  those  located  in 
general  offices  or  at  stations. 

Other  Telephone  Expenses. — Office,  traveling,  and  in- 
cidental expenses,  including  office  rent,  of  employees  whose  pay 
is  chargeable  to  this  account;  rent  of  telephone  conduits,  fines, 
and  poles;  cost  of  battery  renewals  and  supplies,  bicycles  for 
messengers,  and  electric  current  for  telephone  purposes;  also 
excess  payments  to  telephone  companies  when  in  connection 
with  telephone  service  and  not  provided  for  elsewhere. 

Note  B. — The  pay,  rent,  other  office  expenses,  and  traveling  expenses 
of  superintendents  of  telephone,  their  assistants,  clerks,  and  attendants, 
when  engaged  both  in  maintaining  and  operating  telephone  lines,  shall 
be  apportioned  equally  between  this  account  and  account  No.  247, 
."Telegraph  and  telephone  lines." 


APPENDIX  B  373 

408.  OPERATING  FLOATING  EQUIPMENT. 

This  account  shall  include  the  cost  of  operating  floating  equip- 
ment in  water  transfer  service  (ferriage,  lighterage,  and  float- 
age).   (See  general  instructions,  section  1.) 

Superintendence. — The  pay  of  vice  presidents  and  other 
ofiicers  directly  in  charge  of  or  engaged  in  the  operation  of 
boats;  the  pay  of  their  assistants,  clerks,  and  attendants;  also 
the  office,  travehng,  and  other  expenses  of  such  officers  and 
their  employees. 

Wages  of  Crews. — The  pay  of  captains,  pilots,  chief  officers, 
mates,  sailors,  wireless  telegraph  operators,  and  other  employees 
of  the  deck  department;  engineers,  assistant  engineers,  elec- 
tricians, oilers,  firemen,  coal  passers,  and  all  other  employees 
of  the  engineer's  department;  and  pursers,  porters,  and  all 
other  employees  in  the  steward's  department,  except  when  en- 
gaged in  dining  and  buffet  service. 

Fuel. — The  cost,  on  board  boats  (including  the  cost  of  trim- 
ming) of  coal,  oil,  wood,  and  other  fuel  used  for  generating  power, 
heat,  or  light. 

Lubrication. — The  cost  of  oil,  grease,  tallow,  graphite,  and 
other  material  furnished  for  lubricating  purposes. 

Other  Supplies  and  Departmental  "Expenses. — ^The  cost 
of  supplies  furnished  to  deck  department;  the  incidental  ex- 
penses of  deck  department  employees;  supplies  other  than  fuel 
and  lubricants,  furnished  the  engineer's  department;  water 
furnished  to  boats;  incidental  expenses  of  engineer's  department 
employees;  supplies  (other  than  dining  and  buffet  supphes) 
furnished  to  the  steward's  department;  laundry  for  boats;  and 
incidental  expenses  of  steward's  department  employees. 

ITEMS   OF   SUPPLIES 

(See  special  instructions,  section  22) 

Axes.  Hatchets. 

Brooms.  Hose. 

Brushes.  Ice. 

Commissarial  supplies.  Lamps. 

Flags.  Laundry. 

Gas.  Lines. 

Globes.  Mops. 

Grease.  Oil. 

Handspikes.  Pails. 


374 

APPENDIX  B 

Planka. 

Tools,  miscellaneous. 

Provisions. 

Trucks. 

Ropes. 

Waste. 

Shovels. 

Water. 

Soap. 

Wicks. 

Tallow. 

Wrenches. 

Other  Expenses. — ^Expenses  incident  to  the  operation  of 
floating  equipment  not  otherwise  provided  for  in  this  account. 

ITEMS    OF    EXPENSE 

(See  special  instructions,  section  22) 
Customhouse  fees.  Transferring  passengers  in  case  of 

License  fees.  accidents. 

Pumping  out  boats  laid  up.  Wharfage. 

Raising  sunken  boats. 

Elevation  and  Longshore  Labor. — The  cost  of  shore  labor 
in  connection  with  loading  and  unloading  lighterage  freight  at 
wharves  and  piers,  such  as  labor  of  bridgemen  at  transfer  bridges 
and  of  watchmen,  longshoremen,  stevedores,  and  other  wharf  men. 

Elevation  and  Shore  Expenses. — Shore  expenses  in  con- 
nection with  loading  and  unloading  lighterage  freight,  such  as 
the  cost  of  steam  and  electricity  for  power,  heating,  and  light- 
ing; power  and  supplies  used  for  transfer  or  float  bridges;  sup- 
plies used  in  connection  with  operating  wharves  and  piers  and 
not  chargeable  to  account  No.  376,  "Station  supplies  and  ex- 
penses." 

ITEMS   OF   SUPPLIES 

(See  special  instructions,  section  22) 


Brooms. 

Oil  cans. 

Carbons. 

Pails. 

Chalk. 

Pinch  bars. 

Coal  hods. 

Ropes. 

Coal  shovels. 

Salt. 

Cold  chisels. 

Scoops. 

Crowbars. 

Shovels. 

Gas. 

Soap. 

Hammers. 

Tacks. 

Hatchets. 

Tallow. 

Ice. 

Torches. 

Ice  tongs. 

Towels. 

Incandescent  lights. 

Twine. 

Lamps,  reflector. 

Waste. 

Lanterns. 

Water. 

Marline. 

Water  coolers. 

Matches. 

Wheelbarrows. 

Oit 

APPENDIX  B  376 

Note  A. — ^When  the  compensation  for  the  use  of  floating  equipment 
used  in  water  transfer  service  includes  rent,  maintenance,  and  operation, 
the  portion  covering  rent  shall  be  charged  to  income  account  No.  539, 
"Rent  for  floating  equipment,"  the  portion  covering  maintenance  shall 
be  charged  to  the  appropriate  account  for  maintenance  of  equipment, 
and  the  portion  covering  operation  shall  be  included  in  this  account. 

Note  B. — The  cost  of  labor  expended  in  transferring  freight  between 
cars  and  boats  shall  be  distributed  in  such  manner  as  to  include  in  ac- 
count No.  373,  "Station  employees,"  the  expense  of  handling  between 
the  cars  and  the  string  piece  of  the  wharf  or  rail  of  the  boat,  and  to  in- 
clude in  this  account  the  expense  of  handling  upon  the  boats. 

409.  EXPRESS  SERVICE. 

This  account  shall  include  the  cost  of  operating  express  service. 

Drivers  and  Messengers. — Pay  of  express  messengers, 
drivers,  and  helpers,  and  cost  of  their  uniforms,  uniform  trim- 
mings, and  badges;  and  pay  of  baggagemasters  handling  express. 

Other  Expenses. — Pay  of  stablemen  in  express  service,  rent 
of  stables,  and  expense  of  feeding  and  shoeing  horses. 

410.  STATIONERY  AND  PRINTING. 

This  account  shall  include  the  cost  of  stationery  and  printing 
used  in  connection  with  rail  line  transportation,  including  opera- 
tion of  floating  equipment. 

STATIONERY   AND   PRINTING  JTBMS 

(See  special  instructions,  section  22) 

Adding  machines.  Copying  brushes.  ^— 

Addressographs  and  supplies.  Copying  presses. 

Arm  rests.  Crayons. 

Baggage  checks,  printed.  Cross-section  books. 

Baggage  scrip.  Cross-section  paper. 

Baggage  storage  checks.  Cyclostyles. 

Bills  of  lading.  Dating  stamps  and  ribbons. 

Binders.  Delivery  tickets. 

Blank  books.  Dictaphones. 

Blotters.  Dictographs. 

Blotting  paper.  Drawing  paper. 

Bristol  board.  Duplicators. 

Calculating  machines.  Electric  pens. 

Calendars.  Envelopes. 

Carbon  paper.  Erasers,  rubber  and  steel. 

Cardboard.  Eyelet  punches. 

Cards,  blank  and  printed.  Eyelets. 

Circulars.  File  boxes,  paper. 

Computing  tables.  Forms,  blank  and  printed. 

Conductors'  hat  checks.  Fuel  tickets. 

Copy  (impression)  books.  Glass  pens. 


376 


APPENDIX  B 


Hectographs. 

Indexes. 

Ink  for  writing  and  drawing. 

Inkstands. 

Invoice  books. 

Legal  cap  paper. 

Letter  paper. 

Manifold  paper. 

Manifold  pens. 

Mileage  books. 

Mimeographs. 

Mucilage. 

Mucilage  brushes. 

Neostyles. 

Note  paper. 

Notices. 

Numbering  stamps. 

Oil  paper. 

Paper. 

Paper  baskets. 

Paper  clips. 

Paper  cutters. 

Paper  fasteners. 

Paper  files. 

Paper  weights. 

Papyrographs. 

Parchment  paper. 

Pencil  sharpeners. 

Pencils  for  writing  and  drawing. 

Penholders. 

Penracks. 

Pens  for  writing  and  drawing. 

Phonographs  and  records. 

Pins. 

Postage. 


Punches  (not  conductors*  or  bag- 
gagemen's). 
Rubber  bands. 
Rubber  stamps. 
Rulers. 
Ruling  pens. 
Scrapbooks. 
Sealing  wax. 
Seals. 
Shears. 

Shipping  orders. 
Shipping  tags. 
Shorthand  notebooks. 
Sponge  cups. 
Sponges. 

Stamps,  impression. 
Stylographs. 

Tablets,  blank  and  printed. 
Tape. 

Telegraph  blanks. 
Ticket  stamps. 
Tickets. 

Time-tables  (employees) . 
Tissue  (impression)  paper. 
Tracing  cloth. 
Tracing  paper. 
Twine. 

Typewriters  and  ribbons. 
Wage  tables. 
Wastebaskets. 
Water  colors. 
Water  holders. 
Waybills. 
Wrapping  paper. 
Wringers  for  copying  presses. 


NoTK. — The  cost  of  dictionaries,  periodicals,  technical  books,  etc., 
shall  be  included  in  appropriate  superintendence  accounts,  and  city 
directories  and  books  for  reference  used  by  station  agents  shall  be  charged 
to  account  No.  376,  "Station  supplies  and  expenses." 

411.  OTHER  EXPENSES. 

This  account  shall  include  all  expenses  in  connection  with 
rail  line  transportation  not  properly  chargeable  to  other  trans- 
portation accounts. 


ITEMS   OF   EXPENSE 

(See  special  instructions,  section  22) 

Amounts  paid  for  switching  empty  cars  otherwise  than  in  connection 
with  loaded  movements  or  with  the  repairs  to  the  equipment. 


APPENDIX  B  377 

Amounts  paid  on  account  of  bills  of  lading  issued  on  fraudulent  re- 
ceipts. 

Amounts  paid  to  suspended  transportation  department  employees 
covering  periods  of  suspension. 

Compensation  for  property  loss  incident  to  failure  to  stop  at  station 
to  pick  up  passengers. 

Demurrage  accruing  on  a  foreign  line  by  reason  of  error  of  carrier's 
agent. 

Extra  drayage  due  to  agent's  error  in  routing  interline  shipment. 

Fees  paid  arbitrators  in  wage  disputes  of  transportation  department 
employees. 

Loss  of  station  funds  by  burglary,  when  not  covered  by  insurance. 

Loss  of  train  collections  in  holdup. 

Overcharges  paid  foreign  lines  on  account  of  error  of  the  carrier's 
agent  in  routing  and  billing. 

Pay  and  expenses  of  transportation  department  employees  attending 
conferences  with  officers  in  connection  with  wage  disputes. 

Payments  for  switching  on  account  of  cars  not  passing  inspection  at 
junction  points. 

Penalties  imposed  under  reciprocal  demurrage  laws  for  failure  to 
furnish  cars. 

"Penalty  switching"  payments  on  account  of  improper  delivery  of 
cars  to  other  carriers. 

412.  OPERATING  JOINT  TRACKS    AND  FACILITIES— 

DR. 

This  account  shall  include  the  carrier's  proportion  of  the 
transportation  expenses  incurred  by  others  in  the  operation  of 
joint  tracks,  interlockers,  and  other  facilities  which  are  not 
provided  for  in  account  No.  390,  "Operating  joint  yards  and 
terminals — Dr." 

Note  A. — The  purpose  of  this  account  is  to  show  the  amount  accruing 
against  the  carrier  for  its  proportion  of  the  cost  of  operating  tracks  and 
facilities  (other  than  at  joint  yards  and  terminals)  operated  by  others 
and  in  the  joint  use  of  which  the  carrier  participates.  (See  special  in- 
structions, section  9.) 

Note  B. — No  proportions  of  items  of  expense  chargeable  by  the 
operating  carrier  to  accoimts  Nos.  392  to  402,  inclusive,  shall  be  in- 
cluded in  this  account. 

413.  OPERATING  JOINT  TRACKS  AND  FACILITIES— 

CR. 
This  account  shall  include  amoimts  chargeable  to  others  as 
their  proportions  of  transportation  expenses  incurred  by  the 
carrier  in  the  operation  of  joint  tracks,  interlockers,  and  other 
facilities  which  are  not  provided  for  in  account  No.  391,  "Operat- 
ing joint  yards  and  terminals — Cr." 


378  APPENDIX  B 

Note  A. — The  purpose  of  this  account  is  to  show  the  amounts  ac- 
cruing in  favor  of  the  carrier  and  against  others  for  their  proportions  of 
the  cost  of  operating  tracks  and  facilities  (other  than  at  joint  yards  and 
terminals)  operated  by  the  carrier  and  in  the  joint  use  of  which  others 
participate.     (See  special  instructions,  section  9.) 

Note  B. — No  proportions  of  items  of  expense  chargeable  by  the 
operating  carrier  to  accounts  Nos.  392  to  402,  inclusive,  shall  be  included 
in  this  account. 

414.  INSURANCE. 

This  account  shall  mclude  premiums,  except  reinsurance 
premiums,  for  insuring  the  carrier  against  loss  through  injuries 
to  persons  or  damage  to  or  destruction  or  loss  of  property, 
whether  caused  by  fire,  accident,  or  other  cause,  when  such 
loss  to  the  carrier  would  be  chargeable  to  Transportation — Rail 
Line;  also  premiums  on  fidelity  bonds  of  employees  whose  pay 
is  chargeable  to  Transportation — ^Rail  Line.  (See  special  in- 
structions, section  18.) 

Note. — The  premiums  paid  by  the  carrier  to  its  insurance  fund  shall 
be  credited  to  an  insurance  reserve  account,  to  which  account  shall  be 
charged  the  amount  of  all  claims  for  injuries  to  persons  and  damages  to 
the  property  covered  by  its  insurance.  To  such  account  shall  also  be 
charged  all  reinsurance  premiums  paid  to  insurance  companies,  and  to  it 
shall  be  credited  all  amounts  recovered  from  insurance  companies  for 
damage  to  property  reinsured  by  them. 

415.  CLEARING  WRECKS. 

This  account  shall  include  the  cost  of  clearing  wrecks  other 
than  wrecks  of  work  trains. 

Labor. — The  wages  of  employees  while  engaged  in  connec- 
tion with  wrecking  service,  loading,  and  transferring  contents 
of  wrecked  cars,  building  temporary  tracks  around  wrecks,  and 
removing  such  tracks. 

Train  Service. — ^The  cost  of  train  service  in  connection  with 
replacing  wrecked  equipment  upon  the  tracks  and  transporting 
such  equipment  to  shops  for  repairs,  including  amounts  paid  to 
other  companies  for  service  of  locomotives,  derricks,  and  other 
equipment  and  for  wages  of  crews  in  wrecking  service. 

Other  Supplies  and  Expenses. — Payments  for  reloading  or 
transferring  freight,  express,  baggage,  and  mail;  transferring 
passengers,  and  cost  of  provisions  or  board  for  men  clearing  up 
or  watching  at  wrecks. 


APPENDIX  B  379 

Note  A. — Expenses  of  clearing  wrecks  of  work  trains  shall  be  in- 
cluded in  the  cost  of  the  work  in  connection  with  which  the  wrecked  train 
was  engaged. 

Note  B. — The  cost  of  restoring  roadbed  and  tiacks  to  original  condi- 
tion after  wrecks  and  the  cost  of  repairing  equipment  damaged  or  de- 
stroyed by  wrecks  shall  be  charged  to  the  appropriate  accounts  for  main- 
tenance of  way  and  structures  and  maintenance  of  equipment. 

Note  C. — That  proportion  of  payments  to  other  companies  for  use 
of  locomotives,  derricks,  and  other  equipment  in  wrecking  service  which 
represents  rent  shall  be  included  in  the  income  accounts. 

416.  DAMAGE  TO  PROPERTY. 

This  account  shall  include  payments  and  expenses  on  account 
of  damages  to  the  property  of  others,  whether  by  fire,  collision, 
flood,  or  other  cause,  with  the  exception  of  payments  and  ex- 
penses on  account  of  damage  to  property  intrusted  to  the  carrier 
for  transportation,  and  for  damage  to  stock  on  right  of  way. 
It  shall  include  also  fines  or  compensation  paid  for  interference 
with  the  business  of  others,  as  by  detention  of  vessels  at  draw- 
bridges, or  by  blocking  streets. 

This  account  shall  include  also  the  pay,  office  rent,  and  office, 
traveling,  and  other  expenses  of  employees  and  others  engaged 
as  claim  adjusters  or  as  witnesses  in  lawsuits  in  connection  with 
damage  to  property  cases,  or  engaged  in  detection  of  thieves; 
notarial  fees  paid  in  connection  with  such  cases;  and  payments 
for  or  repairs  of  damage  to  equipment  of  other  carriers,  or  to 
property  contained  therein,  such  carriers  having  trackage  rights 
upon  or  grade  crossings  over  the  carrier's  tracks. 

Note  A. — Damage  to  Uve  stock  on  right  of  way,  and  damage  to 
freight  and  baggage  intrusted  for  transportation,  are  provided  for  under 
accounts  No.  417,  "Damage  to  Hve  stock  on  right  of  way";  No.  418, 
"Loss  and  damage — Freight";  and  No.  419,  "Loss  and  damage — 
Baggage." 

Note  B. — Expenses  incident  to  suits  growing  out  of  damage  to  prop- 
erty claims,  not  otherwise  provided  for,  shall  be  included  in  account 
No.  454,  "Law  expenses." 

Note  C. — The  pay,  ofl5ce  rent,  and  the  traveling,  office,  and  other 
expenses  of  claim  adjusters,  claim  clerks,  and  others  engaged  in  claim 
matters  when  not  accurately  assignable  to  a  distinct  class  of  claims, 
shall  be  apportioned  equally  among  the  several  classes  of  claims  over 
which  they  have  jurisdiction  or  in  connection  with  which  they  are  en- 
gaged. This  provision  does  not  apply  to  the  pay  and  expenses  of  general 
officers  or  general  office  employees  whose  pay  is  includible  in  general 
account  VII,  General, 


380  APPENDIX  B 

417.  DAMAGE  TO  LIVE  STOCK  ON  RIGHT  OF  WAY. 

This  account  shall  include  payments  on  account  of  cattle  and 
other  live  stock  killed  or  injured  while  crossing  or  trespassing 
on  the  right  of  way,  including  cost  of  removing  and  burying 
the  same. 

There  shall  be  included  in  this  account  also  the  pay  and  the 
traveling,  ofi&ce,  and  other  expenses  of  employees  and  others 
engaged  as  live-stock  claim  adjusters  or  engaged  as  wdtnesses 
in  lawsuits  in  connection  with  damage  to  live  stock  on  right  of 
way;  also  notarial  fees  in  connection  with  claims  for  damage 
to  live  stock  on  right  of  way. 

Note  A. — Expenses  incident  to  suits  growing  out  of  live-stock  claims, 
not  otherwise  provided  for,  shall  be  included  in  account  No.  454,  "Law 
expenses." 

Note  B. — The  pay,  office  rent,  and  the  traveling,  office,  and  other 
expenses  of  claim  adjusters,  claim  clerks,  and  others  engaged  in  claim 
matters  when  not  accurately  assignable  to  a  distinct  class  of  claims, 
shall  be  apportioned  equally  among  the  several  classes  of  claims  over 
which  they  have  jurisdiction  or  in  connection  with  which  they  are  en- 
gaged. This  provision  does  not  apply  to  the  pay  and  expenses  of  general 
officers  or  general  office  employees  whose  pay  is  includible  in  general 
account  VII,  General. 

418.  LOSS  AND  DAMAGE— FREIGHT. 

This  account  shall  include  payments  and  expenses  on  account 
of  loss,  destruction,  damage,  or  delays  to  revenue  freight  ship- 
ments, including  locomotives  and  cars  transported  as  freight, 
express  matter,  milk  shipments,  and  live  stock,  and  expenses 
incurred  on  account  of  such  payments;  also  expenses  on  account 
of  loss,  destruction,  or  damage  to  shipments  of  company  ma- 
terial. 

This  account  shall  also  include  the  cost  of  repacking  and 
boxing  damaged  freight  shipments;  notarial  fees  in  connection 
with  freight  claims;  freight  charges  paid  other  carriers  on  lost, 
destroyed,  or  damaged  shipments;  pay,  traveling,  office,  and 
other  expenses  of  employees  or  others  engaged  as  freight-claim 
adjusters,  as  witnesses  in  lawsuits  in  connection  with  freight- 
claim  cases,  in  selling  damaged  and  unclaimed  shipments,  or  in 
detecting  thieves;  rent  of  warehouses  used  for  storage  of  dam- 
aged and  astray  freight  shipments,  payments  for  storage  of  such 


APPENDIX  B  881 

shipments  in  public  warehouses,   and  interest  and  penalties 
assessed  for  nonpayment  of  freight  claims. 

Amounts  received  from  the  sale  of  astray  and  damaged  freight 
shall  be  credited  to  this  account. 

Note  A. — Expenses  incident  to  suits  growing  out  of  loss  and  damage 
(freight)  claims,  not  otherwise  provided  for,  shall  be  included  in  account 
No.  454,  "Law  expenses." 

Note  B. — The  pay,  office  rent,  and  traveling,  office,  and  other  ex- 
penses of  claim  adjusters,  claim  clerks,  and  others  engaged  in  claim 
matters  when  not  accurately  assignable  to  a  distinct  class  of  claims, 
shall  be  apportioned  equally  among  the  several  classes  of  claims  over 
which  they  have  jurisdiction  or  in  connection  with  which  they  are  en- 
gaged. This  provision  does  not  apply  to  the  pay  and  expenses  of  general 
officers  or  general  office  employees  whose  pay  is  includible  in  general 
account  VII,  General. 

419.  LOSS  AND  DAMAGE— BAGGAGE. 

This  account  shall  include  payments  for  loss,  destruction, 
damage,  or  delays  to  baggage  and  other  personal  carried  property 
as  baggage,  and  damage  to  personal  apparel;  also  expenses  on 
account  of  such  loss  or  damage. 

Tliis  account  shall  also  include  the  cost  of  repacking  and  box- 
ing damaged  baggage;  notarial  fees  in  connection  with  baggage 
claims;  baggage  claim  payments  made  to  other  carriers  on  lost, 
destroyed,  damaged,  or  delayed  shipments;  pay,  traveling, 
office,  and  other  expenses  of  employees  or  others  engaged  as 
baggage  claim  adjusters,  as  witnesses  in  lawsuits  in  connection 
with  baggage  claim  cases,  in  selling  damaged  and  unclaimed 
baggage,  or  in  detecting  thieves;  rent  of  warehouses  used  ex- 
clusively for  storage  of  damaged  and  unclaimed  baggage,  pay- 
ments for  storage  of  such  shipments  in  public  warehouses,  and 
interest  and  penalties  assessed  for  nonpayment  of  claims. 

Amounts  received  from  the  sale  of  astray  and  damaged  bag- 
gage shall  be  credited  to  this  account. 

Note  A. — Expenses  incident  to  suits  growing  out  of  loss  and  damage 
(baggage)  claims,  not  otherwise  provided  for,  shall  be  included  in  ac- 
count No.  454,  "Law  expenses." 

Note  B. — The  pay,  office  rent,  and  traveling,  office,  and  other  ex- 
penses of  claim  adjusters,  claim  clerks,  and  others  engaged  in  claim 
matters  when  not  accurately  assignable  to  a  distinct  class  of  claims 
shall  be  apportioned  equally  among  the  several  classes  of  claims  over 
which  they  have  jurisdiction  or  in  connection  with  which  they  are  en- 
gaged.   This  provision  does  not  apply  to  the  pay  and  expenses  of  general 


382  APPENDIX  B 

officers  or  general  office  employees  whose  pay  is  includible  in  general 
account  VII,  General. 

Note  C. — When  a  payment  on  account  of  injuries  to  passengers  in- 
cludes allowance  for  damage  to  personal  apparel  the  damage  allowance 
shall  be  included  in  this  account  when  separable;  otherwise  in  the  ap- 
propriate personal  injury  account. 

420.  INJURIES  TO  PERSONS. 

This  account  shall  include  expenses  on  account  of  injuries 
to  persons  which  occur  directly  in  connection  with  transporta- 
tion service,  including  damages  for  ejectment  of  passengers. 

Services  of  employees  and  others  called  in  consultation  in 
relation  to  claim  adjustments;  pay  and  expenses  of  employees 
while  engaged  as  witnesses  as  inquests  and  lawsuits,  and  a 
suitable  proportion  of  donations  made  to  hospitals,  shall  be 
included  in  this  account. 

ITEMS   OF   EXPENSE 

(See  special  instructions,  section  22) 

Artificial  limbs.  Medical  and  surgical  services. 

Carriage  fees.  Medical  and  surgical  supplies. 

Claim  adjusters'  and  clerks'  serv-  Notarial  fees. 

ices.  Nursing. 

Claim  adjusters'  office  expenses.  Railway  transportation. 

Compensation  for  injuries  or  death.  Undertakers'  services. 

Final  judgments,  including  plain-  Undertakers'  supplies. 

tiffs'  court  costs.  Witnesses'  fees  and  expenses  at  in- 
Funeral  expenses.  quests  and  lawsuits. 
Hospital  attendance. 

Note  A. — Expenses  incident  to  personal  injury  suits,  not  otherwise 
provided  for,  shall  be  included  in  account  No.  454,  "Law  expenses." 

Note  B. — Amounts  donated  by  a  carrier  to  hospitals  shall  be  distrib- 
uted, 25  per  cent  to  account  No.  274,  "Injuries  to  persons";  25  per 
cent  to  account  No.  332,  "Injuries  to  persons";  and  50  per  cent  to  ac- 
count No.  420,  "  Injuries  to  persons." 

Note  C. — The  pay,  office  rent,  and  traveling,  office,  and  other  ex- 
penses of  claim  adjusters,  claim  clerks,  and  others  engaged  in  claim 
matters,  when  not  accurately  assignable  to  a  distinct  class  of  claims, 
shall  be  apportioned  equally  among  the  several  classes  of  claims  over 
which  they  have  jurisdiction  or  in  connection  with  which  they  are  en- 
gaged. This  provision  does  not  apply  to  the  pay  and  expenses  of  general 
officers  or  general  office  employees  whose  pay  is  includible  in  general 
account  VII,  General. 

Note  D. — When  a  payment  on  account  of  injuries  to  persons  includes 
allowance  for  damage  to  personal  apparel,  the  damage  allowance  shall 
be  included  in  account  No.  419,  "Loss  and  damage — Baggage,"  when 
separable;  otherwise  the  eiitire  payment  shall  be  included  in  this  accouQt« 


APPENDIX  B  383 

V.  TRANSPORTATION-WATER  LINE. 

The  primary  accounts  included  in  this  general  account  are 
designed  to  show  the  expenses  incurred  in  transporting  persons 
and  property  by  water  lines. 

When  the  compensation  for  the  use  of  floating  equipment 
used  in  water-line  operations  includes  rent,  maintenance,  and 
operation,  the  portion  covering  rent  shall  be  charged  to  income 
account  No.  539,  "Rent  for  floating  equipment,"  the  portion 
covering  maintenance  shall  be  charged  to  the  appropriate  ac- 
counts for  maintenance  of  equipment,  and  the  portion  covering 
operation  shall  be  distributed  to  the  primary  accounts  in  this 
account.    (See  general  instructions,  section  1.) 

431.  OPERATION  OF  VESSELS. 

This  account  shall  include  the  cost  of  operating  vessels  in 
water-line  service. 

It  shall  include: 

Superintendence. — The  pay  of  vice  presidents  and  other 
officers  directly  in  charge  of  or  engaged  in  the  operation  of  ves- 
sels; the  pay  of  their  assistants,  clerks,  and  attendants;  also  the 
office,  traveling,  and  other  expenses  of  such  officers  and  their 
employees. 

Wages  op  Crews. — ^The  pay  of  captains,  pilots,  chief  officers, 
mates,  sailors,  wireless  telegraph  operators,  and  other  em- 
ployees of  the  deck  department;  engineers,  assistant  engineers, 
electricians,  oilers,  firemen,  coal  passers,  and  all  other  employees 
of  the  engineer's  department;  and  pursers,  stewards,  steward- 
esses, cooks,  pantrymen,  waiters,  porters,  and  all  other  employees 
in  the  steward's  department. 

FxjEL. — ^The  cost,  on  board  vessels  (including  the  cost  of 
trimming),  of  coal,  oil,  wood,  and  other  fuel  used  for  generating 
power,  heat,  or  light. 

Lubrication. — ^The  cost  of  oil,  grease,  tallow,  graphite,  and 
other  material  furnished  for  lubricating  purposes. 

Stationery  and  Printing. — The  cost  of  stationery  and 
printing  used  in  connection  with  the  operation  of  vessels. 
(For  stationery  and  printing  items,  see  expense  account 
No.  410.) 


884  APPENDIX  B 

Food  Supplies. — The  cost  of  all  food  supplies  furnished  to 
the  steward's  department. 

Bar  Supplies. — The  cost  of  all  wines,  liquors,  beers,  ales, 
mineral  waters,  cigars,  cigarettes,  tobacco,  and  other  bar  suppUes. 

Other  Supplies  and  Departmental  Expenses. — The  cost 
of  supplies  furnished  to  deck  department;  the  incidental  ex- 
penses of  deck  department  employees;  supplies,  other  than 
fuel  and  lubricants,  furnished  the  engineer's  department;  water 
furnished  to  ships;  and  incidental  expenses  of  engineer's  depart- 
ment employees;  supplies  (other  than  food  and  bar)  furnished 
to  the  steward's  department;  laundr}^  for  ships;  and  incidental 
expenses  of  steward's  department  employees. 

Lay-up  Expenses. — The  pay  of  crews  and  all  other  transpor- 
tation expenses  incurred  on  account  of  floating  equipment  when 
laid  up  and  not  undergoing  repairs  or  betterment. 

Other  Expenses. — ^Expenses  incident  to  the  operation  of 
vessels  not  otherwise  provided  for  in  this  account. 

Note  A. — When  officers  enumerated  above  have  supervision  over 
other  departments  also,  their  pay,  office  and  other  expenses,  as  also  the 
pay,  office  and  other  expenses  of  their  assistants,  clerks,  and  attendants, 
shall  be  equitably  apportioned  among  the  departments  over  which  they 
have  jurisdiction. 

Note  B. — The  rent  for  offices  and  other  structures  of  minor  impor- 
tance used  in  the  operation  of  vessels  shall  be  included  in  this  account. 
The  rent  for  such  property  of  major  importance,  which  is  ordinarily 
leased  for  a  period  of  years,  shall  be  included  in  Income. 

432.  OPERATION  OF  TERMINALS. 

This  accoimt  shall  include  the  expenses  of  the  operation  of 
terminals  devoted  to  water-line  operations.    It  shall  include: 

Superintendence. — The  pay  of  vice  presidents  and  other 
oflficers  in  charge  of  or  engaged  in  the  operation  of  terminals; 
the  pay  of  their  assistants,  clerks,  and  attendants;  also  the 
office,  traveling,  and  other  expenses  of  such  officers  and  their 
employees;  the  salaries  of  agents,  clerks,  and  attendants;  the  pay 
of  port  or  station  agents  and  their  employees;  the  pay  of  wharf 
employees  (except  stevedores  and  other  laborers  provided  for 
in  the  subheading  "Stevedore  and  wharf  labor");  agency  and 
office  expenses;  expenses  of  telegraph  and  telephone  service; 
postage,  heat,  light,  power,  water,  ice,  furniture,  and  other  sup- 


APPENDIX  B  385 

plies  (except  stationery  and  printing);  and  incidental  office  and 
traveling  expenses  of  port  or  station  agents,  their  clerks,  and 
attendants. 

Stationery  and  Printing. — ^The  cost  of  stationery  and 
printing  used  in  connection  with  the  operation  of  terminals. 
(For  stationery  and  printing  items  see  expense  accomit  No.  410.) 

Stevedore  and  Wharf  Labor. — The  pay  of  stevedores, 
foremen,  and  longshoremen  when  engaged  directly  in  loading 
and  unloading  vessels;  payments  for  labor  in  connection  with 
handUng,  trimming,  and  stowing  cargoes  in  vessels,  including 
payments  to  companies  and  individuals  engaged  to  handle  car- 
goes by  contract;  and  the  pay  of  laborers  on  wharves  when 
engaged  in  piling,  tiering,  and  handling  freight,  and  in  unloading 
and  loading  baggage. 

Tugs  and  Lighters — Operation. — Expenses  in  connection 
with  the  operation  of  tugs,  lighters,  and  other  floating  equipment 
employed  in  terminal  operations,  including  superintendence, 
wages,  fuel,  water,  lubricants,  food  supplies,  wharfage,  and 
laborers  engaged  in  handhng  Ughtered  cargoes  (except  directly 
to  or  from  ships). 

Switching,  Lighterage,  and  Other  Transfers. — Pay- 
ments made  to  other  companies  or  individuals  for  lightering, 
switching,  or  transferring  freight;  teaming;  operating  team 
transfers  owned  by  the  carrier;  and  other  expenses  in  connec- 
tion with  the  transfer  of  freight  not  provided  for  in  the  foregoing 
paragi-aph  or  in  revenue  account  No.  121,  "Freight." 

Light,  Heat,  Power  and  Water. — ^The  expenses  of  light, 
heat,  power,  and  water  used  in  the  operation  of  terminals  (ex- 
cept in  agents'  or  superintendents'  offices),  both  when  purchased 
and  when  produced  by  the  carrier. 

Wharf  Supplies  and  Expenses. — ^The  cost  of  supplies  used 
by  and  expenses  of  wharf  employees,  such  as  meals  furnished, 
advertising  for  wharf  employees,  cost  or  rent  of  equipment  for 
watchmen,  firemen,  and  police;  uniforms  for  wharf  employees; 
supplies  for  coopering,  marking,  and  tagging  freight;  car  stand- 
ards, binders,  etc.;  and  expenses  not  chargeable  as  repair  items 
incident  to  keeping  wharves  in  proper  condition. 

Other  Expenses. — Expenses  incident  to  the  operation  of 


386  APPENDIX  B 

terminals  not  otherwise  provided  for  in  this  account,  including 
harbor  master's  fees,  quarantine  expenses,  customhouse  and 
other  port  charges. 

Note  A. — When  officers  enumerated  above  have  supervision  over 
other  departments  also,  their  pay,  office  and  other  expenses,  as  also  the 
pay,  office  and  other  expenses  of  their  assistants,  clerks,  and  attendants, 
shall  be  equitably  apportioned  among  the  departments  over  which  they 
have  jurisdiction. 

Note  B. — The  rent  for  offices  and  other  structures  of  minor  importance 
used  in  the  operation  of  terminals  shall  be  included  in  this  account. 
The  rent  for  such  property  of  major  importance,  which  is  ordinarily 
leased  for  a  period  of  years,  shall  be  included  in  Income. 

433.  INCIDENTAL. 

This  account  shall  include  incidental  transportation  expenses 
in  connection  with  water-line  operations.    It  shall  include: 

Loss  AND  Damage — Freight. — Payments  and  expenses  for 
loss,  damage,  delays,  or  destruction  of  freight  (including  com- 
pany material) ;  uncollectible  freight  charges  paid  other  carriers 
on  misrouted,  lost,  damaged,  or  destroyed  shipments;  cost  of 
repacking  and  boxing  damaged  merchandise;  pay  and  expenses 
of  employees  and  others  engaged  as  adjusters  and  in  detecting 
thieves;  and  the  pay  and  expenses  of  employees  and  others  en- 
gaged as  witnesses  in  lawsuits  in  connection  with  loss  and  dam- 
age cases.  The  net  amount  received  from  the  sale  of  astray  and 
damaged  freight  shall  be  credited  to  this  account. 

Loss  AND  Damage — Baggage. — Payments  and  expenses  for 
loss,  damage,  delays,  or  destruction  of  baggage  or  other  personal 
property  carried  as  baggage,  and  damage  to  personal  apparel; 
the  cost  of  repacking  and  boxing  damaged  baggage;  and  the 
pay  and  expenses  of  employees  or  others  while  engaged  as  ad- 
justers and  witnesses  in  lawsuits  in  cases  involving  loss  or  dam- 
age to  baggage.  The  net  amount  received  from  the  sale  of 
astray  and  damaged  baggage  shall  be  credited  to  this  ac- 
count. 

Damage  to  Property. — Payments  and  expenses  on  account 
of  damages  to  or  destruction  of  property  of  others,  whether 
by  fire,  collision,  or  other  cause,  mth  the  exception  of  payments 
and  expenses  on  account  of  damage  to  property  intrusted  to 
the  carrier  for  transportation;  and  pay  and  expenses  of  em- 


APPENDIX  B  387 

ployees  and  others  while  engaged  as  adjusters  and  as  witnesses 
in  lawsuits  arising  out  of  damage  to  property. 

Injuries  to  Persons. — Compensation  and  expenses  incident 
to  injuries  to  persons  occurring  directly  in  connection  with  the 
transportation  operations  of  water  lines;  a  proportion  of  the 
pay  and  expenses  of  physicians  and  surgeons;  of  claim  adjusters 
and  clerks;  expenses  of  nurses  and  hospital  attendants;  medical 
and  surgical  supplies;  artificial  limbs;  funeral  expenses;  railway, 
boat,  and  carriage  fares  for  conveying  injured  persons  and  at- 
tendants; donations  or  contributions  to  hospitals  in  which  em- 
ployees are  cared  for;  pay  and  expenses  of  employees  and  others 
while  attending  coroners'  inquests,  while  engaged  as  witnesses 
in  lawsuits  in  connection  with  personal  injury  cases,  or  when 
called  in  consultation  in  relation  to  personal  injury  claims. 

Insurance. — Premiums  paid,  except  reinsurance  premiums, 
for  insuring  the  carrier  against  loss  through  injuries  to  persons, 
or  damage  to  or  destruction  or  loss  of  property,  whether  caused 
by  fire,  accident,  or  other  cause,  when  such  loss  to  the  carrier 
would  be  chargeable  to  Transportation — Water  Line;  also  premi- 
ums on  fidelity  bonds  of  employees  whose  pay  is  chargeable  to 
that  account.    (See  special  instructions,  section  18.) 

Note  A. — The  premiums  paid  by  the  carrier  to  its  insurance  fund 
shall  be  credited  to  an  insurance  reserve  account,  to  which  account  shall 
be  charged  the  amount  of  all  claims  for  injuries  to  persons  and  damages 
to  the  property  covered  by  its  insurance.  To  such  account  shall  also  be 
charged  all  reinsurance  premiums  paid  to  insurance  companies,  and  to 
it  shall  be  credited  all  amounts  recovered  from  insurance  companies  for 
damage  to  property  reinsured  by  them. 

Note  B. — Expenses  not  otherwise  provided  for  in  connection  with 
the  conduct  of  loss,  damage,  and  personal  injury  suits  shall  be  charged 
to  account  No.  454,  "Law  expenses,"  but  the  amount  of  final  judgments, 
including  plaintiff's  court  costs,  shall  be  included  in  this  account. 

Note  C. — The  pay,  office  rent,  and  traveling,  office,  and  other  ex- 
penses of  claim  adjusters,  claim  clerks,  and  others  engaged  in  claim 
matters  when  not  directly  assignable  to  a  distinct  class  of  claims,  shall 
be  apportioned  equally  among  the  several  classes  of  claims  over  which 
they  have  jurisdiction  or  in  connection  with  which  they  are  engaged. 

VI.  MISCELLANEOUS  OPERATIONS. 

The  primary  accounts  included  in  this  general  account  are 
designed  to  show  the  expenses  incurred  in  miscellaneous  opera- 
tions.   (See  general  instructions,  section  4.) 


388  APPENDIX  B 

441.  DINING  AND  BUFFET  SERVICE. 

This  account  shall  include  the  cost  of  operating  dining  and 
buffet  service  on  trains  and  transfer  boats.    It  shall  include: 

Superintendence. — The  pay  of  oflficers  directly  in  charge 
of  operating  dining  and  buffet  service;  the  pay  of  their  assistants, 
clerks,  and  office  attendants;  also  the  office,  traveling,  and  other 
expenses  of  such  officers  and  their  employees. 

CoMMissARiAL  EMPLOYEES. — The  pay  of  storekeepers,  as- 
sistant storekeepers,  clerks,  porters,  and  other  employees  in 
commissarial  supply  depots  and  storehouses. 

Stewards. — The  pay  of  stewards  or  conductors  employed 
on  dining  and  buffet  cars  and  transfer  boats. 

Cooks  and  Waiters. — The  pay  of  cooks,  waiters,  and  as- 
sistants on  dining  and  buffet  cars  and  transfer  boats. 

Fuel  and  Supplies. — The  cost  of  fuel  for  cooking  purposes; 
of  provisions,  such  as  meats,  groceries,  vegetables,  fish,  table 
waters,  ice,  etc.;  bar  supplies,  such  as  wines,  liquors,  beers,  ales, 
etc.;  cost  of  licenses;  and  cost  of  cigars,  cigarettes,  and  tobacco. 

Laundry. — ^Expenses  for  laundry  work,  such  as  laundering 
tablecloths,  napkins,  aprons,  etc. 

Stationery  and  Printing. — The  cost  of  stationery  and 
printing  used  in  connection  with  dining  and  buffet  service. 

Other  Expenses. — The  cost  of  flowers  and  plants;  cleaning 
the  interior  of  cars;  rent  and  cost  of  supplies  for  rooms  furnished 
for  dining  and  buffet  service  employees;  and  such  other  ex- 
penses in  connection  with  the  operation  of  dining  and  buffet 
service  as  are  not  provided  for  elsewhere. 

Note. — When  officers  have  immediate  supervision  over  dining  and 
buffet  service  and  other  operations  their  pay,  office  and  other  expenses, 
as  also  the  pay,  office  and  other  expenses  of  their  assistants,  clerks,  and 
office  attendants,  shall  be  equitably  apportioned  to  the  accounts  appro- 
priate to  the  operations  over  which  they  have  supervision. 

442.  HOTELS  AND  RESTAURANTS. 

This  account  shall  include  the  cost  of  operating  hotels,  res- 
taurants, and  lunch  counters  when  the  cost  of  the  operated 
property  is  includible  in  the  road  and  equipment  accounts. 
It  shall  include: 

Superintendence. — ^The  pay  of  officers  directly  in  charge 


APPENDIX  B  389 

of  operating  hotels,  restaurants,  and  lunch  counters;  pay  of 
their  clerks  and  office  attendants;  also  the  office,  traveling,  and 
other  expenses  of  such  officers. 

Employees. — The  pay  of  stewards,  hotel  keepers,  storekeepers, 
checkers,  linen  clerks,  butchers,  chefs,  cooks,  kitchen  help, 
maids,  porters,  elevator  men,  call  boys,  hat  and  cloak  attendants, 
waiters,  waitresses,  laundresses,  engineers,  firemen,  and  other 
employees  engaged  in  operating  hotels,  restaurants,  and  lunch 
counters. 

Fuel  and  Supplies. — The  cost  of  fuel  for  cooking  and  heat- 
ing purposes;  provisions,  such  as  meats,  groceries,  vegetables, 
fish,  table  waters,  ice,  etc.;  bar  supplies,  such  as  wines,  liquors, 
beers,  ales,  etc.;  the  cost  of  liquor  licenses;  the  cost  of  tobacco, 
cigars,  cigarettes,  etc.;  and  miscellaneous  supplies  for  operating 
the  service. 

Stationery  and  Printing. — The  cost  of  stationery  and  print- 
ing used  in  connection  with  the  operation  of  hotels  and  res- 
taurants. 

Other  Expenses. — The  cost  of  lighting,  and  other  items  of 
expense  not  otherwise  provided  for  in  this  account. 

Note. — When  oflBcers  have  immediate  supervision  over  hotels,  res- 
taurants, and  lunch  counters  and  other  operations  their  pay,  office,  and 
other  expenses,  as  also  the  pay,  office,  and  other  expenses  of  their  as- 
sistants, clerks,  and  office  attendants,  shall  be  equitably  apportioned 
to  the  accounts  appropriate  to  the  operations  over  which  they  have 
supervision. 

443.  GRAIN  ELEVATORS. 

This  account  shall  include  the  cost  of  operating  grain  elevators 
other  than  small  elevators  which  are  classed  as  station  facilities. 
It  shall  include: 

Superintendence. — The  pay  of  officers  directly  in  charge  of 
grain-elevator  service;  the  pay  of  their  assistants,  clerks,  and 
office  attendants;  also  the  office,  traveling,  and  other  expenses 
of  such  officers  and  their  employees. 

Employees. — The  pay  of  engineers,  firemen,  foremen,  ma- 
chine men,  oilers,  millwrights,  carpenters,  trimmers,  weighers, 
spout  men,  sweepers,  laborers,  watchmen,  and  all  other  em- 
ployees engaged  in  operating  grain  elevators. 


390  APPENDIX  B 

Fuel  and  Supplies. — The  cost  of  fuel  for  power,  heating, 
and  lighting  plants;  power  for  heating,  lighting,  and  operating 
machinery;  and  water,  ice,  oil,  waste,  and  other  supplies  for 
operating  such  property. 

Stationery  and  Printing. — The  cost  of  stationery  and 
printing  used  in  connection  with  the  operation  of  grain  elevators. 

Other  Expenses. — The  cost  of  grain  used  to  make  up  short- 
age in  elevators;  stationery  and  printing;  rent  for  and  repairs 
of  rented  offices;  and  other  operating  expenses  not  otherwise 
provided  for  in  this  account. 

Note. — When  officers  have  immediate  supervision  over  grain  eleva- 
tors and  other  operations  their  pay,  office,  and  other  expenses,  as  also 
the  pay,  office,  and  other  expenses  of  their  assistants,  clerks,  and  office 
attendants,  shall  be  equitably  apportioned  to  the  accounts  appropriate 
to  the  operations  over  which  they  have  supervision. 

444.  STOCKYARDS. 

This  account  shall  include  the  cost  of  operating  stockyards 
other  than  small  stockyards  or  stock  pens  at  stations,  which 
are  classed  as  station  facilities.    It  shall  include: 

Superintendence. — ^The  pay  of  officers  directly  in  charge 
of  stockyard  operations;  the  pay  of  their  assistants,  clerks,  and 
office  attendants;  also  the  office,  traveling,  and  other  expenses 
of  such  officers  and  employees. 

Employees. — The  pay  of  foremen,  subforemen,  yardmen, 
tallymen,  weighmasters,  stock  loaders,  drovers,  drivers,  en- 
gineers, firemen,  shovelers,  watchmen,  policemen,  and  other 
stockyard  employees. 

Fuel  and  Supplies. — The  cost  of  fuel,  gas,  electric  current, 
water;  hay,  grain,  oats,  and  other  feed  for  stock;  straw  and 
other  bedding  material;  and  other  stockyard  suppUes. 

Stationery  and  Printing. — The  cost  of  stationery  and 
printing  used  in  connection  with  the  operation  of  stockyards. 

Other  Expenses. — Payments  for  loss  or  damage  to  live  stock, 
and  other  expenses  not  otherwise  provided  for  in  this  account. 

Note. — When  officers  have  immediate  supervision  over  stockyard 
service  and  other  operations  their  pay,  office,  and  other  expenses,  as  also 
the  pay,  office,  and  other  expenses  of  their  assistants,  clerks,  and  office 
attendants,  shall  be  equitably  apportioned  to  the  accounts  appropriate 
to  the  operations  over  which  they  have  supervision. 


APPENDIX  B  391 

445.  PRODUCING  POWER  SOLD. 

This  account  shall  include  the  cost  of  operating  power  plants, 
substations,  transmission  systems  and  distribution  systems,  for 
the  production  of  power  sold. 

The  proportion  of  the  cost  assignable  to  the  production  of 
the  power  sold  only  shall  be  included  in  this  account.  (See 
special  instructions,  sections  12,  13,  and  14.) 

This  account  shall  include: 

Superintendence. — The  pay  of  officers  directly  in  charge 
of  power  plants,  substations,  transmission  systems  and  distribu- 
tion systems;  pay  of  their  clerks  and  office  attendants;  also  the 
office,  traveling,  and  other  expenses  of  such  officers  and  em- 
ployees. 

Employees. — ^The  pay  of  foremen,  subforemen,  engineers, 
firemen,  electricians,  system  operators  or  load  dispatchers, 
dynamo  tenders,  foremen  regulators,  regulators  and  assistants, 
switchboard  men,  brush  men,  oilers,  wipers,  wiremen,  and  others 
engaged  in  the  operation  of  power  plant  and  substation  ap- 
paratus and  devices. 

Fuel. — The  cost  of  fuel  used  in  the  production  of  power  and 
for  heating  power  plants. 

Other  Supplies. — The  cost  of  water,  lubricants,  and  other 
power  plant  and  substation  supplies. 

Stationery  and  Printing. — The  cost  of  stationery  and 
printing  used  in  connection  with  producing  power  sold. 

Other  Expenses. — The  items  of  expense  not  otherwise  pro- 
vided for  in  this  account. 

Note. — When  officers  have  immediate  supervision  over  producing 
power  sold  and  other  operations,  their  pay,  office,  and  other  expenses, 
as  also  the  pay,  office,  and  other  expenses  of  their  assistants,  clerks,  and 
office  attendants,  shall  be  equitably  apportioned  to  the  accounts  appro- 
priate to  the  operations  over  which  they  have  supervision. 

446.  OTHER  MISCELLANEOUS  OPERATIONS. 

This  account  shall  include  the  operations  of  facilities  such  as 
cold-storage  plants;  coal-storage  plants;  cotton-compress  plants; 
wood-preser\dng  plants;  ice-supply  plants,  etc.,  when  the  cost 
of  the  facilities  is  includible  in  the  road  and  equipment  accounts 
and  they  are  operated  for  the  benefit  of  the  carrier  and  others. 


392  APPENDIX  B 

The  proportion  assignable  to  the  commercial  operations  only 
shall  be  included  in  this  account. 

Note, — When  officers  have  immediate  supervision  over  other  mis- 
cellaneous service  and  other  operations,  their  pay,  office,  and  other  ex- 
penses, as  also  the  pay,  office,  and  other  expenses  of  their  assistants, 
clerks,  and  office  attendants,  shall  be  equitably  apportioned  to  the  ac- 
counts appropriate  to  the  operations  over  which  they  have  supervision. 

Vn.  GENERAL. 

The  primary  accounts  included  in  this  general  account  are 
designed  to  show  the  expenses  incurred  of  a  general  character 
not  chargeable  to  the  preceding  general  accoimts,  such  as  those 
for  general  administration  and  accounting,  and  those  of  the 
financial,  law,  real  estate,  tax,  and  claim  departments. 

The  accounts  for  general  expenses  shall  be  kept  in  such  man- 
ner as  to  show  separately,  by  primary  accounts,  the  expenses 
directly  assignable  to  water-line  operations. 

Note. — Directly  assignable  organization  and  administration  expenses 
incident  to  investments  in  leased  or  nonoperating  physical  property,  and 
in  stocks,  bonds,  and  other  securities,  are  chargeable  to  income  account 
No.  549,  "Maintenance  of  investment  organization." 

451.  SALARIES  AND  EXPENSES  OF  GENERAL  OF- 
FICERS. 

This  account  shall  include: 

Salaries. — The  pay  of  all  general  officers  not  otherwise  pro- 
vided for,  including  salaries  and  fees  of  receivers  and  commis- 
sions paid  to  general  officers  in  lieu  of  salaries. 

LIST   OF   OFFICERS 

(See  special  instructions,  section  22) 

Chairman  of  the  board.  General  auditor. 

President.  Auditor. 

Assistant  to  president.  Assistant  auditor. 

Vice  president.  Auditor  of  revenues. 

Assistant  to  vice  president.  Auditor  of  passenger  accounts. 

Secretary.  Assistant  auditor  of  passenger  ac- 

Assistant  secretary.  counts. 

Transfer  agent.  Auditor  of  freight  accounts. 

Treasurer.  Assistant    auditor   of   freight   ac- 

Assistant  treasurer.  counts. 

Local  treasurer.  Auditor  of  station  accounts. 

Comptroller.  Auditor  of  disbursements. 

Assistant  comptroller.  Assistant  auditor  of  disbursements. 


APPENDIX  B  393 

Auditor  of  miscellaneous  accounts.  Assistant  freight  claim  agent. 

Assistant  auditor  of  miscellaneous  General  accountant. 

accounts.  Real-estate  agent. 

Auditor  of  coal  and  coke  accounts.  Assistant  real-estate  agent. 

Freight  claim  agent.  Tax  commissioner. 

Expenses. — The  traveling  and  other  expenses  of  officers 
whose  pay  is  included  in  this  account,  including  supplies  for 
business  cars  used  by  them,  cost  of  running  official  trains  for 
them,  and  cost  of  membership  fees  and  dues  in  railway  and  other 
associations. 

NoTK  A. — When  oflficers'  duties  are  restricted  to  a  single  department, 
their  salaries  and  expenses  shall  be  charged  to  that  department  in  the 
accounts  for  superintendence  or  for  law  expenses,  as  may  be  appropriate. 
When  officers  have  immediate  supervision  over  more  than  one  operating 
department,  their  salaries  and  expenses  shall  be  apportioned  equally 
among  the  departments  over  which  they  have  jurisdiction. 

Note  B. — The  pay  and  expenses  of  the  purchasing  agent,  assistant 
purchasing  agent,  assistant  to  purchasing  agent,  general  storekeeper, 
division  storekeeper,  their  clerks  and  attendants,  shall  be  charged  through 
clearing  accounts  "Material  store  expenses"  and  "Stationery  store  ex- 
penses," or  material  account  "Fuel,"  as  may  be  appropriate. 

452.  SALARIES  AND  EXPENSES  OF  CLERKS  AND  AT- 
TENDANTS. 

This  account  shall  include  the  pay  and  expenses  of  clerks  and 
attendants  of  the  officers  whose  salaries  are  includible  in  ac- 
count No.  451,  "Salaries  and  expenses  of  general  officers." 

Pay  of  Clerks. — The  pay  of  persons  employed  in  accounting 
and  clerical  service. 

LIST   OF   EMPLOYEES 

(See  special  instructions,  section  22) 

Cashiers.  Postmasters. 

Chief  accountants.  Route  agents. 

Chief  clerks.  Special  agents. 

Clerks.  Stenographers. 

Inspectors.  Ticket  receivers. 

Mail  clerks.  Traveling  accountants. 

Paymasters.  Traveling  auditors. 

Pay  of  Attendants. — The  pay  of  persons  employed  in  at- 
tendance at  general  offices  and  on  business  cars. 


394  APPENDIX  B 

LIST  OF  EMPLOYEES 

(See  special  instructions,  section  22) 

Bank  messengers.  Porters. 

Chauffeurs.  Pump  men. 

Cleaners.  Stablemen. 

Cooks.  Superintendent    of    general   office 

Drivers  of  service  wagons.  building. 

Elevator  operators.  Telegraph  operators. 

Engineers.  Telephone  operators. 

Firemen.  Ushers. 

Janitors.  Waiters. 

Messengers.  Watchmen. 

Expenses. — The  traveling  and  other  expenses  of  employees 
designated  above,  including  the  cost  of  supplies  for  business 
cars  and  cost  of  running  official  trains  for  them. 

453.  GENERAL  OFFICE  SUPPLIES  AND  EXPENSES. 
This  account  shall  include  the  office  expenses  of  officers  desig- 
nated in  account  No.  451,  "Salaries  and  expenses  of  general 
officers." 

ITEMS   OF   EXPENSE   AND   SUPPLIES 

(See  special  instructions,  section  22) 

Alterations  of  partitions  and  fix-       Local  messenger  service. 

tures  in  general  offices.  Periodicals  and  newspapers. 

Atlases  and  maps.  Rent  of  general  offices. 

Books  for  office  use.  Rent  of  tabulating  machines. 

Cable  tolls.  Repairs  of  rented  general  offices. 

Cleaning.  Reports  of  commercial  standings. 

Express  charges.  Service  of  automobiles. 

Furniture  repairs  and  renewals.  Telegraph  service. 

Heating.  Telephone  service. 

Horse  keep.  Watchmen  service. 
Lighting. 

Note. — The  proportion  of  general  office  expenses  occasioned  by  the 
law  department  shall  be  included  in  account  No.  454,  "Law  expenses." 

454.  LAW  EXPENSES. 

This  account  shall  include  the  pay  and  the  office  and  other 
expenses,  when  not  provided  for  elsewhere,  of  officers  and  em- 
ployees of  the  law  department,  the  cost  of  suits,  and  the  pay- 
ments of  special  law  fees. 


APPENDIX  B  395 

LIST   OP   OFFICERS  AND   EMPLOYEES 

(See  special  instructions,  section  22) 

General  counsel.  Statutory  attorney. 

General  solicitor.  Attorney. 

Assistant  counsel.  Counsel. 

Solicitor.  Law  agent. 

Commerce  counsel.  Clerks. 

Commerce  agent.  Oflace  attendants. 
Special  counsel. 

ITEMS   OF  EXPENSE   AND   SUPPLIES 

(See  special  instructions,  section  22) 

Arbitrators'  services  in  settlement  against  litigation  in  respect  to 

of  disputed  questions.  patents. 

Cost  of  taking  depositions.  Membership  fees  and  dues  in  law 

Cost  of  testimony.  associations. 

Cost  of  suits.  Notarial    fees    not    provided    for 

Court  bonds.  elsewhere. 

Court  expenses.  Office  expenses. 

Drawing     and     recording     agree-  Printing  of  briefs,  testimony,  and 

ments  as  to  trackage  rights,  etc.  reports. 
Express  charges.  Proportion   of   general   office    ex- 
Fees   and   retainers   of   attorneys  penses. 

(not  regular  employees) .  Rent  of  oflSices. 

Law  books.  Special  fees. 

Legal  forms.  Telegraph  service. 

Legal  reports.  Telephone  service. 

Membership  fees  and  dues  in  as-  Traveling  expenses. 

sociations    to    protect    carriers  Witness  fees  not  provided  for  else- 
where. 

455.  INSURANCE. 

This  account  shall  include  premiums,  except  reinsurance 
premiums,  for  insuring  the  carrier  against  loss,  through  in- 
juries to  persons  or  damage  to  or  destruction  or  loss  of  property, 
whether  caused  by  fire,  accident,  or  other  cause,  when  such  loss 
to  the  carrier  would  be  chargeable  to  general  account  VII, 
General;  also  premiums  on  fidelity  bonds  of  officers  and  em- 
ployees whose  pay  is  chargeable  to  general  account  VII,  General. 
(See  special  instructions,  section  18.) 

Note. — The  premiums  paid  by  the  carrier  to  its  insurance  fund  shall 
be  credited  to  an  insurance  account,  to  which  account  shall  be  charged 
the  amount  of  all  claims  for  injuries  to  persons  and  damages  to  the  prop- 
erty covered  by  its  insurance.  To  such  account  shall  also  be  charged 
all  reinsurance  premiums  paid  to  insurance  companies,  and  to  it  shall 
be  credited  all  amounts  recovered  from  insurance  companies  for  dam- 
age to  the  property  reinsured  by  them< 


396 


APPENDIX  B 


456.  RELIEF  DEPARTMENT  EXPENSES. 

This  account  shall  include  salaries  and  expenses  incurred  in 
connection  with  conducting  relief  departments;  also  contribu- 
tions to  such  departments. 

457.  PENSIONS. 

This  account  shall  include  pensions  or  gratuities  paid  out  of 
the  carrier's  funds  to  retired  employees  or  their  heirs  and  the 
expenses  solely  in  connection  therewith. 

458.  STATIONERY  AND  PRINTING. 

This  account  shall  include  the  cost  of  stationery  and  printing 
used  in  general  offices  and  not  chargeable  to  other  accounts, 
including  the  cost  of  printing  annual  reports,  contracts,  leases, 
stock  certificates,  and  passes. 

STATIONERY   AND    PRINTING   ITEMS 

(See  special  instructions,  section  22) 


Adding  machines. 

Addressographs  and  supplies. 

Arm  rests. 

Binders. 

Blank  books. 

Blotters. 

Blotting  paper. 

Bristol  board. 

Calculating  machines. 

Calendars. 

Carbon  paper. 

Cardboard. 

Cards,  blank  and  printed. 

Circulars. 

Computing  tables. 

Copy  (impression)  books. 

Copying  brushes. 

Copying  presses. 

Crayons. 

Cyclostyles. 

Dating  stamps  and  ribbons. 

Dictaphones. 

Dictographs. 

Drawing  paper. 

Duplicators. 

Electric  pens. 

Envelopes. 

Erasers,  rubber  and  steel. 

Eyelet  punches. 

Eyelets, 


File  boxes,  paper. 

Forms,  blank  and  printed. 

Glass  pens. 

Hectographs. 

Indexes. 

Ink  for  writing  and  drawing. 

Inkstands. 

Invoice  books. 

Legal  cap  paper. 

Letter  paper. 

Manifold  paper. 

Manifold  pens. 

Mimeographs. 

Mucilage. 

Mucilage  brushes. 

Neostyles. 

Note  paper. 

Notices. 

Numbering  stamps. 

Oil  paper. 

Paper. 

Paper  baskets. 

Paper  clips. 

Paper  cutters. 

Paper  fasteners. 

Paper  files. 

Paper  weights. 

Papyrographs. 

Parchment  paper. 


APPENDIX  B  Sd7 

Pay  checks.  Shorthand  notebooks. 

Pencil  sharpeners.  Sponge  cups. 

Pencils  for  writing  and  drawing.  Sponges. 

Penholders.  Stamps. 

Penracks.  Stamps,  impression. 

Pens  for  writing  and  drawing.  Stylographs, 

Phonographs  and  records.  Tablets,  blank  and  printed. 

Pins.  Tape. 

Postage.  Telegraph  blanks. 

Punches  (not  conductors'  or  bag-      Tissue  (impression)  paper. 

gagemen's).  Tracing  cloth. 

Rubber  bands.  Tracing  paper. 

Rubber  stamps.  Twine. 

Rulers.  Typewriters  and  ribbons. 

Ruling  pens.  Wage  tables. 

Scrapbooks.  Wastebaskets. 

Sealing  wax.  Water  colors. 

Seals.  Water  holders. 

Shears.  Wrapping  paper. 

Shipping  tags.  Wringers  for  copying  presses. 

Note  A. — The  cost  of  printing  briefs,  legal  forms,  testimony,  reports, 
etc.,  for  the  law  department  is  chargeable  to  account  No.  454,  "Law 
expenses." 

Note  B. — The  cost  of  printing  bonds,  etc.,  in  connection  with  the 
carriers'  funded  debt  shall  be  included  in  balance-sheet  account  No.  725, 
"Discount  on  funded  debt." 

459.  VALUATION  EXPENSES. 

This  account  shall  include  expenses  incident  to  the  ascertain- 
ment (in  accordance  with  the  Act  to  Regulate  Commerce  as 
amended  March  1,  1913,  or  with  other  Federal  or  State  require- 
ments) of  the  value  of  property  owned  or  used  by  the  carrier, 
such  expenses  including  pay,  and  office,  traveling,  and  other 
expenses  of  officers  specially  employed  or  assigned  to  such 
work,  and  of  their  assistants,  clerks,  and  attendants,  and  the 
cost  of  stationery  and  printing,  and  of  engineering  supplies 
consumed. 

Note. — No  charge  shall  be  made  to  this  account  for  the  salaries  of 
officers  or  of  their  clerks  and  attendants  for  incidental  services  in  connec- 
tion with  valuation  work;  but  special  office,  clerical,  traveling,  and  in- 
cidental expenses  incurred  by  these  officers  on  account  of  such  work 
shall  be  included  as  a  part  of  the  cost  of  the  work. 

460.  OTHER  EXPENSES. 

This  account  shall  include  incidental  general  expenses  which 
are  not  properly  chargeable  to  any  of  the  foregoing  accounts. 


398  APPENDIX  B 

ITEMS   OF   EXPENSE 

(See  special  instructions,  section  22) 

Cost  of  draping  buildings. 

Cost  of  publishing  annual  reports  in  newspapers,  and  other  corporate 
and  financial  notices  of  general  character. 

Cost  of  publishing  notices  of  stockholders'  meetings  and  of  election  of 
directors. 

Donations  on  account  of  catastrophes,  epidemics,  etc. 

Donations  to  local  fire  departments. 

Donations  to  Y.  M.  C.  A.,  and  similar  institutions. 

Exchange  on  checks  cashed  or  deposited. 

Exchange  on  drafts  bought. 

Fees  and  expenses  paid  to  directors  and  trustees. 

Loss  through  payment  of  wages  to  a  wrong  person. 

Penalties  assessed  for  nonpayment  of  claims  for  overcharges. 

461.  GENERAL  JOINT  FACILITIES— DR. 

This  account  shall  include  the  carrier's  proportions  of  general 
expenses  incurred  by  others  incident  to  maintaining  and  operat- 
ing tracks,  yards,  terminals,  and  other  facilities  used  jointly. 

Note. — The  purpose  of  this  account  is  to  show  the  amount  accruing 
against  the  carrier  for  its  proportion  of  the  expense  of  general  administra- 
tion of  tracks,  yards,  terminals,  and  other  facilities  administered  by 
others,  and  in  the  joint  use  of  which  the  carrier  participates.  (See 
special  instructions,  section  9.) 

462.  GENERAL  JOINT  FACILITIES— OR. 

This  account  shall  include  amounts  chargeable  to  others  as 
their  proportions  of  general  expenses  incurred  by  the  carrier 
incident  to  maintaining  and  operating  tracks,  yards,  terminals, 
and  other  facilities  used  jointly. 

Note. — The  purpose  of  this  account  is  to  show  the  amounts  accruing 
in  favor  of  the  carrier  and  against  others  for  their  proportions  of  the 
expense  of  general  administration  of  tracks,  yards,  terminals,  and 
other  facilities  administered  by  the  carrier,  and  in  the  joint  use  of  which 
others  participate.     (See  special  instructions,  section  9.) 

Vm.  TRANSPORTATION  FOR  INVESTMENT-CR. 

This  account  shall  include  fair  allowances  representing  the 
expense  to  the  carrier  of  transporting,  on  transportation  trains, 
men  engaged  in  and  material  for  construction. 

Amounts  credited  to  this  account  shall  be  concurrently  charged 
to  the  appropriate  property  investment  accountg. 


APPENDIX  C 

CLASSIFICATION  OF  INCOME,  PROFIT  AND  LOSS, 
AND  GENERAL  BALANCE  SHEET  ACCOUNTS 
PRESCRIBED  BY  THE  INTERSTATE  COM- 
MERCE COMMISSION.    ISSUE  OF  1914 


GENERAL  INSTRUCTIONS 

The  carrier's  records  shall  be  kept  with  sufficient  par- 
ticularity to  show  fully  the  facts  pertaining  to  all  entries 
made  in  the  accounts  provided  herein  for  Income,  Profit 
and  Loss,  and  General  Balance  Sheet.  Where  the  full 
information  is  not  recorded  in  the  general  books,  the 
entries  therein  shall  be  supported  by  other  records  in 
which  the  full  details  shall  be  shown.  Such  general 
book  entries  shall  contain  sufficient  reference  to  the 
detail  records  to  permit  ready  identification,  and  the 
detail  records  shall  be  filed  in  such  manner  as  to  be  readily 
accessible  for  examination  by  representatives  of  the  Inter- 
state Commerce  Commission. 

1.  When  the  title  and  definition  of  an  income,  profit  and 
loss,  or  general  balance-sheet  account  clearly  indicate  that  it 
is  a  summary  of  other  accounts,  it  is  not  required  that  a  special 
ledger  account  shall  be  kept  under  such  a  title  to  include  the 
balances  from  the  accounts  usually  kept  in  the  ledger,  but  in 
such  case  the  titles  of  the  subaccounts  in  the  ledger  shall  give 
references  by  numbers,  titles,  or  both,  to  the  income,  profit 
and  loss,  or  general  balance-sheet  account  prescribed  herein 
of  which  they  are  subdivisions. 

S99 


400  APPENDIX  C 

2.  When  the  compensation  for  the  use  of  equipment  held 
under  lease  includes  both  rent  and  maintenance  (repairs  and 
depreciation),  the  lessor  shall  determine  the  proportion  of  gross 
rent  applicable  respectively  to  rent,  repairs,  and  depreciation. 
The  lessor  shall  credit  the  portion  covering  rent  to  the  appro- 
priate rent  account  in  Income,  the  portion  covering  repairs  to 
the  account  originally  charged  or  chargeable  with  the  cost  of 
the  repairs,  and  the  portion  covering  depreciation  to  the  ac- 
crued depreciation  account  for  equipment.  The  lessee  shall  cor- 
respondingly charge  the  portion  covering  rent  to  the  appropriate 
rent  account  in  Income,  the  portion  covering  repairs  to  the  ap- 
propriate equipment  repair  account,  and  the  portion  covering 
depreciation  to  the  appropriate  equipment  depreciation  account 
in  Operating  Expenses. 

When  the  compensation  for  the  use  of  equipment  held  under 
lease  covers  only  rent  and  depreciation  (the  lessee  being  re- 
sponsible for  the  current  repairs)  the  lessor  shall  determine  the 
proportion  of  the  gross  rent  applicable  to  rent  and  that  ap- 
phcable  to  depreciation.  The  lessor  shall  credit  the  portion 
covering  rent  to  the  appropriate  rent  account  in  Income,  and 
the  portion  covering  depreciation  to  the  accrued  depreciation 
account  for  equipment.  The  lessee  shall  charge  the  portion 
covering  rent  to  the  appropriate  rent  account  in  Income,  and 
the  portion  covering  depreciation  to  the  appropriate  deprecia- 
tion account  in  Operating  Expenses. 

When  the  lease  provides  that  the  lessee  shall  be  responsible 
for  the  maintenance  of  the  leased  equipment,  the  lessee  shall 
charge  the  estimated  current  depreciation  to  the  appropriate 
depreciation  account  in  Operating  Expenses,  and  concurrently 
credit  the  amounts  thus  charged  to  balance-sheet  account  No. 
778,  "Other  unadjusted  credits."  To  this  latter  account  shall 
be  charged,  to  the  extent  of  the  credits  therein  with  respect  to 
the  equipment,  the  cost  of  restoring  the  depreciation  upon  the 
equipment,  or  the  payments  made  to  the  lessor  for  the  purpose 
of  compensating  for  the  loss  through  depreciation  at  the  time 
the  equipment  is  surrendered. 

When  the  accounting  in  connection  with  equipment  held  under 
lease  requires,  under  this  rule,  an  apportionment  of  the  com- 


APPENDIX  C  401 

pensation  as  between  rent  and  maintenance,  tlie  lessor  shall 

show  the  distribution  of  the  charges  upon  its  bills,  and  such 
distribution  shall  be  adhered  to  by  the  lessee. 

INCOME  ACCOUNTS 

SPECIAL  INSTRUCTIONS 

Page 

1.  Income  accounts  defined 402 

2.  Delayed  items 403 

3.  Uncollectible  revenue 403 

PRIMARY  ACCOUNTS 
I.  Credits: 

501.  Railway  operating  revenues 403 

502.  Revenues  from  miscellaneous  operations 403 

503.  Hire  of  freight  cars — Credit  balance 404 

604.  Rent  from  locomotives 404 

"505.  Rent  from  passenger-train  cars 404 

506.  Rent  from  floating  equipment 405 

507.  Rent  from  work  equipment.  . ." 405 

508.  Joint  facility  rent  income 405 

509.  Income  from  lease  of  road 405 

510.  Miscellaneous  rent  income 406 

511.  Miscellaneous  nonoperating  physical  property. .  407 

512.  Separately  operated  properties — Profit 407 

513.  Dividend  income 407 

514.  Income  from  funded  securities 408 

515.  Income  from  unfunded  securities  and  accounts.  409 

516.  Income  from  sinking  and  other  reserve  funds. . .  409 

517.  Release  of  premiums  on  funded  debt 409 

518.  Contributions  from  other  companies 410 

519.  Miscellaneous  income 410 

II.  Debits: 

531.  Railway  operating  expenses 410 

532.  Railway  tax  accruals 410 

533.  Uncollectible  railway  revenues 411 


402  APPENDIX  C 

II.  Debits — Continued  Page 

534.  Expenses  of  miscellaneous  operations 411 

535.  Taxes  on  miscellaneous  operating  property 412 

536.  Hire  of  freight  cars — Debit  balance 412 

537.  Rent  for  locomotives 412 

538.  Rent  for  passenger-train  cars 413 

539.  Rent  for  floating  equipment 413 

540.  Rent  for  work  equipment 413 

541.  Joint  facility  rents 414 

542.  Rent  for  leased  roads 414 

543.  Miscellaneous  rents 415 

544.  Miscellaneous  tax  accruals 415 

545.  Separately  operated  properties — Loss 415 

546.  Interest  on  funded  debt 416 

547.  Interest  on  unfunded  debt 416 

548.  Amortization  of  discount  on  funded  debt 417 

549.  Maintenance  of  investment  organization 417 

550.  Income  transferred  to  other  companies 418 

551.  Miscellaneous  income  charges 418 

552.  Income  applied  to  sinking  and  other  reserve  funds  418 

553.  Dividend  appropriations  of  income 419 

554.  Income  appropriated  for  investment  in  physical 

property 419 

555.  Stock  discount  extinguished  through  income ....  420 

556.  Miscellaneous  appropriations  of  income 420 


SPECIAL  INSTRUCTIONS 

1.  Income  Accounts  Defined. — Income  accounts  are  those 
designed  to  show,  as  nearly  as  practicable,  for  each  fiscal  period, 
the  total  amount  of  money  that  a  carrier  becomes  entitled  to 
receive  for  services  rendered,  the  returns  accrued  upon  invest- 
ments, the  accrued  costs  paid  or  payable  for  the  services  ren- 
dered by  it,  the  losses  sustained  by  it,  the  amounts  accrued  for 
taxes,  for  use  of  moneys  and  for  use  of  properties  of  others,  and 
the  appropriations  made  from  income  during  the  period.    The 


APPENDIX  C  403 

net  balance  of  income  (or  loss)  shall  be  carried  to  Profit  and 
Loss. 

2.  Delayed  Items. — When  no  provisions  have  been  made 
through  entries  in  the  accounts  of  this  classification  for  antici- 
pating delayed  items  chargeable  or  creditable  to  Income,  and 
the  amount  of  any  such  item  is  relatively  so  large  that  its  in- 
clusion in  the  accounts  for  a  single  year  would  seriously  distort 
those  accounts,  the  carrier,  if  so  authorized  upon  application 
to  the  Interstate  Commerce  Commission,  shall  distribute  to 
Profit  and  Loss  so  much  of  the  amount  as  may  be  authorized. 
The  carrier,  in  its  application  to  the  Commission,  shall  file  the 
full  particulars  concerning  each  item  and  the  reasons  which  in 
its  judgment  indicate  the  propriety  of  such  accounting. 

Delayed  items  are  items  representing  transactions  which  oc- 
curred before  the  current  year. 

3.  Uncollectible  Revenue. — ^An  account  is  provided  for 
revenue  charges  against  individuals  and  companies  which  dur- 
ing the  period  for  which  the  Income  Account  is  stated  have  been 
determined  to  be  uncollectible.  This  account  is  provided  for  the 
purpose  of  eliminating  from  the  ledger  assets  of  the  carrier,  or  of 
writing  down  to  nominal  amounts  in  its  asset  accounts,  items  of 
revenue  charges  which  can  not  be  collected,  such  as  freight 
charges  for  which  credit  has  been  allowed,  or  undercharges  dis- 
covered after  the  freight  has  been  delivered. 


TEXT   PERTAINING   TO    THE   INCOME 
ACCOUNTS 
I.  CREDITS. 

501.  RAILWAY  OPERATING  REVENUES. 

This  account  shall  include  the  total  revenues  derived  from 
operations  as  shown  in  the  accounts  provided  in  the  classifica- 
tion of  operating  revenues. 

602.  REVENUES  FROM  MISCELLANEOUS  OPERATIONS. 

This  account  shall  include  the  total  revenues  derived  from  the 

operation  of  miscellaneous  operating  physical  property,  such  as 


404  APPENDIX  C 

that  the  cost  of  which  is  includible  in  balance-sheet  account 
No.  705,  "Miscellaneous  physical  property." 

Note. — The  income  from  miscellaneous  nonoperating  physical  prop- 
erty shall  be  included  in  account  No.  511,  "Miscellaneous  nonoperating 
physical  property." 

503.  HIRE  OF  FREIGHT  CARS— CREDIT  BALANCE. 

This  account  shall  include  the  net  credit  balance  of  (1)  amounts 
receivable  accrued  for  the  use  of  the  accounting  company's 
freight  cars  leased  or  interchanged,  and  (2)  amounts  payable 
accrued  for  the  use  of  the  freight  cars  of  other  carriers,  leased 
or  interchanged,  and  for  the  use  of  freight  cars  of  individuals 
and  companies  not  carriers. 

Note  A. — If  the  net  balance  is  a  debit,  it  shall  be  included  in  account 
No.  536,  "Hire  of  freight  cars — Debit  balance." 

Note  B. — Rent  for  freight  cars  included  in  the  lease  of  road  to  another 
company  shall  be  included  in  account  No.  509,  "Income  from  lease  of 
road." 

Note  C. — Rents  paid  for  freight  cars  used  in  construction  work-train 
service  are  chargeable  to  the  cost  of  the  work.  (See  general  instruc- 
tions for  the  classification  of  investment  in  road  and  equipment,  sec- 
tion 4  c.) 

Note  D. — A  fair  rent  for  freight  cars  used  in  construction  work-train 
service  shall  be  credited  to  the  account  "Hire  of  freight  ears."  (See 
general  instructions  for  the  classification  of  investment  in  road  and 
equipment,  section  4c.) 

504.  RENT  FROM  LOCOMOTIVES. 

This  account  shall  include  amounts  receivable  accrued  as 
rent  for  the  use  of  the  accounting  company's  locomotives  leased 
or  interchanged. 

Note  A. — Rent  for  locomotives  included  in  lease  of  road  to  another 
company  shall  be  included  in  account  No.  509,  "Income  from  lease  of 
road." 

Note  B. — ^A  fair  rent  for  locomotives  used  in  construction  work-train 
service  shall  be  credited  to  this  account.  (See  general  instructions  for 
the  classification  of  investment  in  road  and  equipment,  section  4  c.) 

505.  RENT  FROM  PASSENGER-TRAIN  CARS. 

This  account  shall  include  amounts  receivable  accrued  as 
rent  for  the  use  of  the  accounting  company's  passenger-train 
cars  leased  or  interchanged. 


APPENDIX  C  405 

Note. — Rent  for  passenger-train  cars  included  in  lease  of  road  to 
another  company  shall  be  included  in  account  No.  509,  "Income  from 
lease  of  road." 

506.  RENT  FROM  FLOATING  EQUIPMENT. 

This  account  shall  include  amounts  receivable  accrued  as  rent 
for  the  use  of  the  accounting  company's  floating  equipment 
leased  or  chartered. 

Note. — Rent  from  floating  equipment  included  in  lease  of  road  to 
another  company  shall  be  included  in  account  No.  609,  "Income  from 
lease  of  road." 

507.  RENT  FROM  WORK  EQUIPMENT. 

This  account  shall  include  amounts  receivable  accrued  as 
rent  for  the  use  of  the  accounting  company's  work  equipment 
leased  or  interchanged. 

Note  A. — Rent  for  work  equipment  included  in  lease  of  road  to  an- 
other company  shall  be  included  in  account  No.  509,  "Income  from 
lease  of  road." 

Note  B. — A  fair  rent  for  work  equipment  used  in  construction  work- 
train  service  shall  be  credited  to  this  account.  (See  general  instructions 
for  the  classification  of  investment  in  road  and  equipment,  section  4  c.) 

508.  JOINT  FACILITY  RENT  INCOME. 

This  account  shall  include  amounts  receivable  accrued  for 
rent  of  tracks,  yards,  terminals,  and  other  facilities  owned  or 
controlled  by  the  accounting  company  and  used  jointly  with 
other  companies  or  individuals. 

Amounts  receivable  from  other  companies  in  reimbursement 
for  taxes  on  property  jointly  used  shall  be  credited  to  this  ac- 
count. 

Note. — The  portion  of  the  cost  of  maintenance,  operation,  or  ad- 
ministration of  joint  facilities  recoverable  from  others  shall  be  credited 
to  the  various  joint  facility  accounts  provided  for  operating  expenses. 
When  the  compensation  for  the  use  of  joint  facilities  is  a  fixed  amount 
or  is  based  upon  a  charge  per  passenger,  ton,  car,  or  other  unit,  it  shall 
be  fairly  apportioned  by  the  creditor  between  this  account  and  the 
appropriate  joint  facility  operating  expense  accounts. 

509.  INCOME  FROM  LEASE  OF  ROAD. 

This  account  shall  include  the  entire  amount  receivable  ac- 
crued for  the  exclusive  use  of  road,  tracks,  or  bridges  (including 
equipment  or  other  railway  property  covered  by  the  contract) 
owned  or  controlled  by  the  accounting  company,  whether  pay- 


406  APPENDIX  C 

able  to  the  accounting  company  in  cash  or  disbursed  by  the 
lessee  on  behalf  of  the  accounting  company  as  interest  on  funded 
debt,  guaranteed  dividends  on  stock,  or  otherwise. 

When  the  lessor  company  maintains  the  road  and  equipment 
leased,  the  cost  of  maintaining  the  property  rented  shall  be 
charged  to  this  account,  except  that  when  the  rent  thus  receiv- 
able for  the  use  of  property  other  than  equipment  is  relatively 
small  and  the  expense  of  maintenance  is  not  separable,  the 
entire  amount  received  may  be  credited  to  revenue  account 
No.  142,  "Rents  of  buildings  and  other  property." 

If,  under  the  terms  of  a  lease,  the  deficit,  or  any  portion  of  it, 
resulting  from  the  lessee  company's  operations  of  the  property 
leased  is  payable  by  the  lessor  company,  the  amount  thus  pay- 
able shall  be  charged  to  this  account  by  the  lessor. 

Note  A. — When  taxes  on  leased  property  are  assumed  by  the  lessor, 
the  accruals  of  such  taxes  shall  be  included  in  the  lessor's  account  No. 
532,  "Railway  tax  accruals." 

Note  B. — If  property  the  rent  of  which  is  chargeable  to  account 
No.  542,  "Rent  for  leased  roads,"  is  sublet  by  the  accounting  company, 
the  rent  receivable  therefor  shall  be  credited  to  this  account. 

510.  MISCELLANEOUS  RENT  INCOME. 

This  account  shall  include  such  rents  of  property  owned  and 
controlled  by  the  accounting  carrier  as  are  not  provided  for  in 
the  foregoing  accounts. 

To  this  account  shall  be  charged  the  cost  of  maintenance  of 
the  property  rented,  also  specific  incidental  expenses  in  connec- 
tion with  such  property,  such  as  the  cost  of  negotiating  contracts, 
advertising  for  tenants,  fees  paid  conveyancers,  collectors' 
commissions,  and  analogous  items. 

Note  A. — If  property  the  rent  of  which  is  chargeable  to  account 
No.  543,  "  Miscellaneous  rents,"  is  sublet  by  the  accounting  company, 
the  rent  receivable  therefor  shall  be  credited  to  this  account. 

Note  B. — Taxes  on  property  the  rent  of  which  is  creditable  to  this 
account  shall  be  charged  to  account  No.  532,  "Railway  tax  accruals." 

Note  C. — The  rent  from  property  carried  in  balance-sheet  account 
No.  705,  "  Miscellaneous  physical  property,"  shall  not  be  included  in 
this  account,  but  in  account  No.  511,  "Miscellaneous  nonoperating 
physical  property." 

Note  D. — Rent  and  other  income  from  real  estate  acquired  for  new 
lines  or  for  additions  and  betterments  shall  be  credited  to  the  appropriate 
road  and  equipment  accoimts  until  the  completion  or  coming  into  service 
of  the  property. 


APPENDIX  C  407 

611.  MISCELLANEOUS  NONOPERATING  PHYSICAL 
PROPERTY. 
This  account  shall  include  the  net  credit  balance  of  the  non- 
operating  revenues  or  income  from,  and  the  expenses  (including 
depreciation,  but  excluding  taxes)  of,  physical  property  the  cost 
of  which  is  carried  in  balance-sheet  account  No.  705,  "Mis- 
cellaneous physical  property." 

Note  A. — Net  debit  balances  in  this  account  shall  be  shown  in  red 
ink. 

Note  B. — The  revenues  from  the  operation  of  miscellaneous  operat- 
ing physical  property  shall  be  included  in  income  account  No.  502, 
"Revenues  from  miscellaneous  operations,"  and  the  expenses  of  opera- 
tions shall  be  included  in  account  No.  534,  "Expenses  of  miscellaneous 
operations." 

512.  SEPARATELY  OPERATED  PROPERTIES— PROFIT. 

This  account  shall  include  amounts  receivable  under  the 
terms  of  agreements  or  contracts  whereby  the  surplus  resultmg 
from  the  operation  by  others  of  properties  of  other  companies 
having  a  separate  corporate  existence  is  to  be  paid,  in  whole  or 
in  part,  to  the  accounting  company. 

In  determining  the  amoimt  receivable  by  the  accounting 
company,  consideration  shall  be  given  not  only  to  the  operating 
revenues  and  operating  expenses  but  also  to  other  items  of  in- 
come or  deduction  which  affect  that  amount. 

Note  A. — The  amount  payable  by  the  operating  company  shall  be 
charged  by  it  to  account  No.  550,  "Income  transferred  to  other  com- 
panies." 

Note  B. — Dividends  or  other  returns  upon  securities  issued  by  sep- 
arately operated  companies,  and  held  or  controlled  by  the  accounting 
company,  shall  be  included  in  account  No.  513,  "Dividend  income"; 
No.  514,  "Income  from  funded  securities";  No.  515,  "Income  from  un- 
funded securities  and  accounts";  or  No.  516,  "Income  from  sinking  and 
other  reserve  funds,"  as  may  be  appropriate. 

613.  DIVIDEND  INCOME. 

This  account  shall  include  dividends  declared  on  railway  and 
other  stocks,  the  income  from  which  is  the  property  of  the  ac- 
counting company,  whether  such  stocks  are  owned  by  the  ac- 
counting company  and  held  in  its  treasury  or  deposited  in  trust, 
or  are  controlled  through  lease  or  otherwise. 

Dividends  declared  shall  not  be  credited  prior  to  actual  coUec- 


408  APPENDIX  C 

tion  unless  their  payment  is  reasonably  assured  by  past  ex- 
perience, guaranty,  anticipated  provision,  or  otherwise. 

Accruals  of  guaranteed  dividends  may  be  included  in  this  ac- 
count if  their  payment  is  reasonably  assured. 

Note  A. — This  account  shall  not  include  credits  for  dividends  on 
stocks  issued  or  assumed  by  the  accounting  company  and  owned  by  it, 
whether  pledged  as  collateral  or  held  in  its  treasury,  in  special  deposits, 
or  in  sinking  or  other  reserve  funds. 

Note  B. — Dividends  on  stocks  of  other  companies  held  in  sinking  or 
other  reserve  funds  shall  be  credited  to  account  No.  516,  "Income  from 
sinking  and  other  reserve  funds." 

514.  INCOME  FROM  FUNDED  SECURITIES. 

This  account  shall  include  interest  on  bonds  and  other  funded 
securities  and  on  debenture  stock  of  other  companies,  the  income 
from  which  is  the  property  of  the  accounting  company,  whether 
such  securities  are  owned  by  the  accoimting  company  and  held 
in  its  treasury  or  deposited  in  trust,  or  are  controlled  through 
lease  or  otherwise.  Interest  accrued  shall  not  be  credited  prior 
to  actual  collection  unless  its  payment  is  reasonably  assured  by 
past  experience,  guaranty,  anticipated  provision,  or  otherwise. 

At  the  option  of  the  accounting  company  there  may  be  in- 
cluded each  year  in  this  account  the  portion,  applicable  to  the 
fiscal  period,  of  the  amount  requisite  to  extinguish,  during  the 
interval  between  the  date  of  acquisition  and  the  date  of  ma- 
turity, the  discount  or  premium  on  funded  securities  of  other 
companies  owned.  Amounts  thus  credited  or  charged  shall  be 
concurrently  charged  or  credited  to  the  account  in  which  the 
cost  of  the  securities  is  carried. 

Note  A. — The  term  funded  securiHea  as  here  used  means  all  unmatured 
bonds,  notes,  and  other  evidences  of  indebtedness  (except  open  accounts 
for  advances)  none  of  which  by  the  terms  of  the  creation  of  the  debt 
matures  until  more  than  one  year  after  the  date  of  such  creation,  pro- 
vided that  in  case  of  an  obligation  maturing  serially,  such  as  car-trust 
notes,  the  entire  amount  shall  be  included  in  funded  securities  if  any 
portion  of  the  obligation  matures  later  than  one  year  after  date  of  issue. 

Note  B. — This  account  shall  not  include  interest  on  funded  securities 
issued  or  assumed  by  the  accounting  company  and  owned  by  it,  whether 
pledged  as  collateral  or  held  in  its  treasury,  in  special  deposits,  or  in 
sinking  or  other  reserve  funds. 

Note  C. — Interest  on  funded  securities  of  other  companies  held  in 
sinking  or  other  reserve  funds  shall  be  included  in  account  No.  616, 
"Inoome  from  sinking  and  other  reserve  funds." 


APPENDIX  C  409 

Note  D. — Interest  accruing  after  maturity  on  any  securities  not  in 
sinking  or  other  reserve  funds  shall  be  included  in  account  No.  515, 
"Income  from  unfunded  securities  and  accounts." 

515.  INCOME   FROM    UNFUNDED    SECURITIES   AND 

ACCOUNTS. 
This  account  shall  include  interest  on  unfunded  securities, 
notes,  and  other  evidences  of  indebtedness  payable  on  demand 
or  having  dates  of  maturity  one  year  or  less  from  the  date  of 
issue,  interest  on  matured  funded  securities  of  other  companies, 
interest  on  bank  balances  and  on  open  accounts,  and  other 
analogous  items,  including  discount  on  short-term  notes.  The 
discount  on  short-term  notes  shall  be  distributed,  through  equal 
monthly  credits,  over  the  term  of  the  notes. 

Note  A. — Interest  on  assets  held  in  sinking  and  other  reserve  funds 
shall  be  included  in  account  No.  516,  "Income  from  sinking  and  other 
reserve  funds." 

Note  B. — Discount  on  bills  for  material  purchased  shall  be  credited 
to  the  accounts  to  which  is  charged  the  cost  of  the  material  with  respect 
to  which  the  discount  is  allowed. 

516.  INCOME  FROM  SINKING  AND  OTHER  RESERVE 

FUNDS. 

This  account  shall  include  the  income  accrued  on  cash,  se- 
curities, and  other  assets  (not  including  securities  issued  or  as- 
sumed by  the  accounting  company)  held  in  sinking  and  other 
reserve  funds. 

At  the  option  of  the  accounting  company  there  may  be  in- 
cluded each  year  in  this  account  the  portion,  applicable  to  the 
fiscal  period,  of  the  amount  requisite  to  extinguish,  during  the 
interval  between  the  date  of  acquisition  and  the  date  of  ma- 
turity, the  discount  or  premium  on  funded  securities  held  in 
sinking  or  other  reserve  funds.  Amounts  thus  credited  or 
charged  shall  be  concurrently  charged  or  credited  to  the  accoxmt 
in  which  the  cost  of  the  securities  is  carried. 

Note. — Credits  to  fund  reserve  accounts  representing  income  on  re- 
serve funds  shall  be  concurrently  charged  to  account  No.  552,  "Income 
applied  to  sinking  and  other  reserve  funds." 

617.  RELEASE  OF  PREMIUMS  ON  FUNDED  DEBT. 

This  account  shall  include,  during  each  fiscal  period,  such 
proportion  of  the  premiums  on  outstanding  funded  debt  as  may 


410  APPENDIX  C 

be  applicable  to  the  period.  This  proportion  shall  be  deter- 
mined in  accordance  with  special  instructions  for  balance-sheet 
accounts,  section  3. 

518.  CONTRIBUTIONS  FROM  OTHER  COMPANIES. 

This  account  shall  include  amounts  received  or  receivable 
from  other  companies  or  individuals,  representing  the  whole  or 
a  part  of  the  net  deficit  of  the  accounting  company  when,  under 
the  terms  of  agreements  or  contracts,  no  obUgation  for  subse- 
quent reimbursement  is  incurred. 

In  determining  the  amount  receivable  by  the  accounting  com- 
pany, consideration  shall  be  given  not  only  to  the  operating 
revenues  and  operating  expenses,  but  also  to  other  items  of  in- 
come or  deduction  which  affect  that  amount. 

Note. — The  amount  payable  shall  be  charged  by  the  contributing 
company  to  account  No.  545,  "Separately  operated  properties — Loss." 

619.  MISCELLANEOUS  INCOME. 

This  account  shall  include  all  items,  not  provided  for  else- 
where, properly  creditable  to  Income  Account  during  the  fiscal 
period. 

n.  DEBITS. 

631.  RAILWAY  OPERATING  EXPENSES. 

This  account  shall  include  the  total  expenses  caused  by  opera- 
tions, as  shown  in  the  accounts  provided  in  the  classification  of 
operating  expenses. 

632.  RAILWAY  TAX  ACCRUALS. 

This  account  shall  include  accruals  for  taxes  of  all  kinds  (in- 
cluding Federal  income  tax)  relating  to  railway  property  (in- 
cluding floating  equipment,  if  any),  operations,  and  privileges, 
whether  based  upon  the  valuation  of  the  property,  amount  of 
stocks  and  bonds  issued  or  outstanding,  gross  or  net  earnings, 
dividends  declared,  number  of  passengers  carried,  quantity  of 
freight  transported,  length  of  line  operated  or  owned,  rolling 
stock  operated  or  owned,  or  other  basis. 

The  taxes  on  leased  property  shall  be  included  in  this  account 


APPENDIX  C  411 

by  the  carrier  obligated  to  assume  such  expenses  under  the  terms 
of  the  lease. 

Note  A. — Taxes  on  leased  property  paid  by  one  party  to  the  lease 
and  chargeable  to  the  other  party  to  the  lease  shall  be  charged  directly  to 
the  party  bearing  the  expense  and  not  included  in  the  Income  Account 
of  the  party  first  making  payment. 

Note  B. — Taxes  on  other  than  railway  property,  operations,  and 
privileges,  shall  be  charged  to  account  No.  544,  "Miscellaneous  tax 
accruals,"  when  the  amount  is  separable  from  the  taxes  chargeable  to 
this  account. 

Note  C. — Special  assessments  for  street  and  other  improvements, 
and  special  benefit  taxes,  such  as  water  taxes  and  the  like,  shall  be  in- 
cluded in  operating  expense  accounts  or  investment  accounts,  as  may  be 
appropriate. 

Note  D. — Amounts  received  in  reimbursement  of  taxes  on  property 
jointly  used  shall  be  credited  to  account  No.  508,  "Joint  facility  rent 
income."  Amounts  paid  in  reimbursement  of  such  taxes  shall  be  charged 
to  account  No.  541,  "Joint  facility  rents." 

Note  E. — Taxes  accruing  on  new  lines  under  construction  or  on  prop- 
erty acquired  for  the  extension  of  existing  lines  or  for  addition  or  better- 
ment purposes  before  the  facilities  are  opened  for  commercial  operation 
or  the  property  acquired  becomes  available  for  service  shall  be  charged 
to  road  and  equipment  accounts. 

533.  UNCOLLECTIBLE  RAILWAY  REVENUES. 

This  account  shall  include  the  amount  of  uncollected  revenue 
charges  against  companies  and  individuals  representing  tariff 
charges  for  service  rendered  (including  not  only  the  accounting 
carrier's  revenue  charges,  but  also  charges  advanced  to  other 
carriers)  when  such  amounts  have  been,  during  the  period  for 
which  the  Income  Account  is  stated,  determined  to  be  uncol- 
lectible. (See  special  instructions  for  the  classification  of  operat- 
ing revenues,  section  1.) 

Note  A. — This  account  shall  not  be  construed  to  relieve  the  carrier 
from  its  responsibility  for  collecting  the  lawfully  established  charges. 

Note  B. — This  account  shall  not  include  charges  for  service  if  it  has 
not  been  performed  in  accordance  with  the  contract  and  which,  on  that 
account,  are  not  lawfully  collectible  from  companies  or  individuals,  such 
as  freight  charges  on  lost  or  destroyed  shipments. 

634.  EXPENSES  OF  MISCELLANEOUS  OPERATIONS. 

This  account  shall  include  the  total  expenses  caused  by  the 
operation  of  miscellaneous  physical  property  the  cost  of  which 
is  includible  in  balance-sheet  account  No,  705,  "Miscellaneous 
physical  property," 


412  APPENDIX  C 

Note. — The  expenses  of  miscellaneous  nonoperating  physical  prop- 
erty shall  be  included  in  account  No.  511,  "Miscellaneous  nonoperating 
physical  property." 

535.  TAXES  ON  MISCELLANEOUS  OPERATING  PROP- 

ERTY. 
This  account  shall  include  accruals  of  taxes  paid  or  payable 
upon  miscellaneous  operating  property,  such  as  that  the  cost  of 
which  is  includible  in  account  No.  705,  "  Miscellaneous  physical 
property." 

Note. — Taxes  upon  miscellaneous  nonoperating  physical  property 
shall  be  included  in  account  No.  544,  "  Miecellaneous  tax  accruals." 

536.  HIRE  OF  FREIGHT  CARS— DEBIT  BALANCE. 

This  account  shall  include,  except  as  provided  for  in  the  clas- 
sification for  investment  in  road  and  equipment,  the  net  debit 
balance  of  (1)  amounts  receivable  accrued  for  the  use  of  the  ac- 
counting company's  freight  cars  leased  or  interchanged,  and 
(2)  amounts  payable  accrued  for  the  use  of  the  freight  cars  of 
other  carriers,  leased  or  interchanged,  and  for  the  use  of  freight 
cars  of  individuals  and  companies  not  carriers.  (See  general 
instructions,  section  2.) 

Note  A. — If  the  net  balance  is  a  credit,  it  shall  be  included  in  account 
No.  503,  "Hire  of  freight  cars — Credit  balance." 

Note  B. — Rent  for  freight  cars  included  in  the  lease  of  road  to  the 
accounting  company  shall  be  included  in  account  No.  542,  "Rent  for 
leased  roads." 

Note  C. — Interest  accrued  on  equipment  obligations  shall  be  charged 
to  account  No.  546,  "Interest  on  funded  debt,"  or  No.  547,  "Interest 
on  unfunded  debt,"  as  may  be  appropriate. 

Note  D. — Rents  paid  for  freight  cars  used  in  construction  work-train 
service  are  chargeable  to  the  cost  of  the  work.  (See  general  instruc- 
tions for  the  classification  of  investment  in  road  and  equipment,  sec- 
tion 4  c.) 

Note  E. — A  fair  rent  for  freight  cars  used  in  construction  work-train 
service  shall  be  credited  to  account  "Hire  of  freight  cars."  (See  general 
instructions  for  the  classification  of  investment  in  road  and  equipment, 
section  4  c.) 

537.  RENT  FOR  LOCOMOTRHES. 

This  account  shall  include  amounts  payable  accrued  for  the 
use  of  the  locomotives  of  others,  leased  or  interchanged,  except 
as  provided  for  in  the  classification  for  investment  in  road  and 
equipment.    (See  general  instructions,  section  2.) 


APPENDIX  C  413 

Note  A. — The  rent  for  locomotives  included  in  the  lease  of  road  to 
the  accounting  company  shall  be  included  in  account  No.  642,  "Rent 
for  leased  roads." 

Note  B. — Interest  accrued  on  equipment  obligations  shall  be  charged 
to  account  No.  546,  "Interest  on  funded  debt,"  or  No.  547,  "Interest  on 
unfunded  debt,"  as  may  be  appropriate. 

Note  C, — Rent  paid  for  locomotives  used  in  construction  work-train 
service  is  chargeable  to  the  cost  of  the  work.  (See  general  instructions 
for  the  classification  of  investment  in  road  and  equipment,  section  4  c.) 

538.  RENT  FOR  PASSENGER-TRAIN  CARS. 

This  account  shall  include  amounts  payable  accrued  for  the 
use  of  the  passenger-train  cars  of  others,  leased  or  interchanged, 
and  also  for  use  of  sleeping  cars  operated  under  contract  ar- 
rangement, except  as  provided  for  in  the  classification  for  invest- 
ment in  road  and  equipment.  (See  general  instructions,  sec- 
tion 2.) 

Note  A. — The  rent  for  passenger-train  cars  included  in  the  lease  of 
road  to  the  accounting  company  shall  be  included  in  account  No.  542, 
"Rent  for  leased  roads." 

Note  B. — Interest  accrued  on  equipment  obligations  shall  be  charged 
to  account  No.  546,  "Interest  on  funded  debt,"  or  No.  547,  "Interest  on 
unfunded  debt,"  as  may  be  appropriate. 

539.  RENT  FOR  FLOATING  EQUIPMENT. 

This  account  shall  include  amounts  payable  accrued  for  the 
use  of  the  floating  equipment  of  others,  leased  or  chartered,  ex- 
cept as  provided  for  in  the  classification  for  investment  in  road 
and  equipment.    (See  general  instructions,  section  2.) 

Note  A. — The  rent  of  floating  equipment  included  in  the  lease  of 
road  to  the  accounting  company  shall  be  included  in  account  No.  542, 
"Rent  for  leased  roads." 

Note  B. — Interest  accrued  on  equipment  obligations  shall  be  charged 
to  account  No.  546,  "Interest  on  funded  debt,"  or  No.  547,  "Interest  on 
unfunded  debt,"  as  may  be  appropriate. 

540.  RENT  FOR  WORK  EQUIPMENT. 

This  account  shall  include  amounts  payable  accrued  for  the 
use  of  the  work  equipment  of  others,  leased  or  interchanged, 
except  as  provided  for  in  the  classification  for  investment  in 
road  and  equipment.    (See  general  instructions,  section  2.) 

Note  A. — The  rent  for  work  equipment  included  in  the  lease  of  road 
to  the  accounting  company  shall  be  included  in  account  No.  542,  "Rent 
for  leased  roads." 

Note  B. — Interest  accrued  on  equipment  obligations  shall  be  charged 


414  APPENDIX  C 

to  account  No.  646,  "Interest  on  funded  debt,"  or  No.  647,  "Interest 
on  unfunded  debt,"  as  may  be  appropriate. 

Note  C. — Rent  paid  for  work  equipment  when  used  in  construction 
work-train  service  is  chargeable  to  the  cost  of  the  work.  (See  general 
instructions  for  the  classification  of  investment  in  road  and  equipment, 
section  4  c.) 

541.  JOINT  FACILITY  RENTS. 

This  account  shall  include  amounts  payable  accrued  as  rent 
for  tracks,  yards,  terminals,  and  other  facilities  owned  or  con- 
trolled by  other  carriers,  companies,  or  individuals,  and  in  the 
joint  use  of  which  the  accounting  company  participates. 

Amounts  paid  or  payable  by  the  accounting  company  in  re- 
imbursement for  taxes  on  property  jointly  used  shall  be  charged 
to  this  account. 

Note. — The  cost  of  maintenance,  operation,  or  administration  of 
joint  facilities,  chargeable  to  the  accounting  company,  shall  be  charged 
to  the  various  joint  facility  accounts  provided  for  operating  expenses. 
When  the  compensation  for  the  use  of  joint  facilities  is  a  fixed  amount 
or  is  based  upon  a  charge  per  passenger,  ton,  car,  or  other  unit,  it  shall 
be  fairly  apportioned  between  this  account  and  the  appropriate  joint 
facility  operating  expense  accounts.  This  apportionment  shall  be  made 
by  the  operating  company,  and  shall  be  followed  by  the  accounting 
company. 

542.  RENT  FOR  LEASED  ROADS. 

This  account  shall  include  amounts  payable  accrued  as  rent 
for  roads,  tracks,  or  bridges  (including  equipment  and  other  rail- 
way property  covered  by  the  contract)  of  other  companies,  held 
imder  lease  or  other  agreement  by  the  terms  of  which  exclusive 
use  and  control  for  operating  purposes  are  secured.  The  entire 
amount  of  rent  payable  by  the  lessee  in  accordance  with  the 
agreement  shall  be  included  in  this  account,  whether  paid  to 
the  lessor  in  cash  or  disbursed  by  the  lessee,  on  behalf  of  the 
lessor,  as  interest  on  funded  debt,  guaranteed  dividends  on  stock, 
or  otherwise.    (See  general  instructions,  section  2.) 

Note  A. — When  taxes  on  leased  property  are  assumed  by  the  lessee 
the  accruals  of  such  taxes  shall  be  included  in  the  lessee's  account  No.  532, 
"Railway  tax  accruals." 

Note  B, — If,  under  the  terms  of  a  lease,  the  deficit  or  any  portion  of 
it  resulting  from  the  lessee's  operation  of  the  property  leased  is  payable 
by  the  lessor  company,  the  amount  shall  be  charged  to  account  No.  509, 
"Income  from  lease  of  road,"  by  the  lessor  and  credited  to  this  jtccount 
by  the  lessee, 


APPENDIX  C  415 

Note  C. — If  property,  the  rent  of  which  is  chargeable  to  this  account, 
is  sublet  by  the  accounting  company  to  others,  the  rent  from  the  sublease 
shall  be  credited  to  account  No.  509,  "Income  from  lease  of  road." 

Note  D. — Payments  for  the  exclusive  use  of  road  and  equipment  main- 
tained by  the  lessor  and  used  in  the  accounting  company's  operations 
(when  considerable  in  amount  and  when  not  provided  for  in  the  classifica- 
tions of  operating  expenses)  shall  be  divided  into  two  portions:  One, 
representing  cost  of  maintenance,  shall  be  charged  to  the  appropriate 
maintenance  accounts  and  the  other,  representing  rent  (amount  ap- 
plicable to  the  investment  in  the  property),  shall  be  charged  to  this 
account. 

543.  MISCELLANEOUS  RENTS. 

This  account  shall  include  rents  payable  accrued  on  property 
held  by  the  accounting  company  under  lease  or  other  agreement 
and  not  properly  chargeable  to  any  of  the  foregoing  accounts. 

Note  A. — This  account  shall  not  include  rents  provided  for  in  the 
operating  expense  accounts. 

Note  B. — If  property,  the  rent  of  which  is  chargeable  to  this  account, 
is  sublet  by  the  accounting  company  to  others,  the  rent  from  the  sublease 
shall  be  credited  to  account  No.  510,  "Miscellaneous  rent  income." 

Note  C. — Payments  for  the  exclusive  use  of  miscellaneous  property 
maintained  by  the  lessor  and  used  by  the  accounting  company  shall  be 
divided  into  two  portions:  One,  representing  the  cost  of  maintenance, 
shall  be  charged  to  the  appropriate  operating  accounts,  and  the  other, 
representing  rent  (amount  applicable  to  the  investment  in  the  property), 
shall  be  charged  to  this  account.  The  bill  rendered  by  the  creditor  shall 
show  the  distribution  of  the  payments  as  between  maintenance  and  rent, 
and  such  distribution  shall  be  adhered  to  by  the  debtor. 

544.  MISCELLANEOUS  TAX  ACCRUALS. 

This  account  shall  include  all  accruals  for  taxes  not  provided 
for  elsewhere,  such  as  taxes  on  securities  owned,  taxes  on  in- 
come from  securities  owned,  and  taxes  on  miscellaneous  non- 
operating  physical  property  the  cost  of  which  is  includible  in 
balance-sheet  account  No.  705,  "Miscellaneous  physical  prop- 
erty." 

Note  A. — When  the  proper  separation  of  any  particular  tax  is  not 
ascertainable  the  entire  amount  shall  be  included  in  account  No.  532, 
"Railway  tax  accruals." 

Note  B, — Taxes  upon  miscellaneous  operating  property  shall  be 
charged  to  account  No.  535,  "Taxes  on  miscellaneous  operating  prop- 
erty." 

645.  SEPARATELY  OPERATED  PROPERTIES— LOSS. 

This  account  shall  include  amounts  payable  under  the  terms 
of  agreements  or  contracts  whereby  the  deficit  resulting  from 


416  APPENDIX  C 

the  operation  by  others  of  properties  of  other  companies  having 
a  separate  corporate  existence  is  to  be  paid,  in  whole  or  in  part, 
by  the  accounting  company. 

In  determining  the  amount  payable  by  the  accounting  com- 
pany, consideration  shall  be  given  not  only  to  the  operating 
revenues  and  operating  expenses,  but  also  to  other  items  of 
income  or  deduction  which  affect  that  amount. 

Note  A. — The  amount  receivable  by  the  operating  company  shall  be 
credited  by  it  to  account  No.  518,  "Contributions  from  other  companies." 

Note  B. — Dividends,  or  other  returns  upon  securities  issued  by  sepn 
arately  operated  companies  and  held  or  controlled  by  the  accounting 
company  shall  not  be  included  in  this  account  to  offset  a  deficit  payable, 
but  in  account  No.  513,  "Dividend  income";  No.  514,  "Income  from 
funded  securities";  or  No.  515,  "Income  from  unfunded  securities  and 
accounts,"  as  may  be  appropriate. 

646.  INTEREST  ON  FUNDED  DEBT. 

Tliis  account  shall  include  the  current  accruals  of  interest  on 
all  classes  of  debt,  the  principal  of  which  is  includible  in  balance- 
sheet  account  No.  755,  "Funded  debt  unmatured,"  or  No.  757, 
" Nonnegotiable  debt  to  affiliated  companies";  also  interest 
accruals  on  debenture  stock  and  on  receiver's  certificates  issued 
for  a  term  of  more  than  one  year.  This  account  shall  be  kept  in 
such  form  that  the  interest  on  debenture  stock,  on  receivers' 
certificates,  and  on  other  classes  of  funded  debt  may  be  shown 
separately  in  the  annual  report  to  the  Conunission. 

Note  A. — This  account  shall  not  include  charges  for  interest  on  funded 
debt  obligations  issued  or  assumed  by  the  accounting  company  and 
owned  by  it,  whether  pledged  as  collateral  or  held  in  its  treasury,  in 
special  deposits,  or  in  sinking  or  other  reserve  funds.  (See  account 
No.  552,  "Income  applied  to  sinking  and  other  reserve  funds.") 

Note  B. — When  funded  debt  is  incurred  for  new  lines  or  extensions, 
or  for  addition  and  betterment  purposes,  the  accruals  of  interest  on  such 
funded  debt  (less  interest  received  on  unexpended  balances) ,  to  the  date 
of  completion  or  coming  into  service  of  the  property  so  acquired  shall 
be  included  in  the  road  and  equipment  accounts. 

547.  INTEREST  ON  UNFUNDED  DEBT. 

This  account  shall  include  interest  accrued  on  unfunded 
dept,  such  as  short-term  notes  payable  on  demand  or  having 
dates  of  maturity  one  year  or  less  from  dates  of  issue,  interest 
on  receiver's  certificates  issued  for  a  term  of  one  year  or  less, 


APPENDIX  C  417 

interest  on  matured  funded  securities  and  open  accounts  in- 
cluding interest  on  overcharge  claims,  discount  and  expense  on 
demand  and  short-term  loans,  interest  on  receipts  outstanding 
for  installments  paid  on  capital  stock,  and  other  analogous  items. 
The  discount  on  short-term  notes,  if  of  a  considerable  amount, 
shall  be  distributed,  through  equal  monthly  charges,  over  the 
term  of  the  notes. 

Note. — When  short-term  notes  or  other  evidences  of  unfunded  in- 
debtedness are  issued  for  new  lines  or  extensions  or  for  addition  and 
betterment  purposes  the  accrual  of  interest  to  the  date  of  completion 
or  coming  into  service  of  the  property  shall  be  included  in  the  road  and 
equipment  accounts. 

648.  AMORTIZATION  OF  DISCOUNT  ON  FUNDED 
DEBT. 
This  account  shall  be  charged  during  each  fiscal  period  with 
the  proportion  of  the  discount  and  expense  on  funded  debt 
obligations  applicable  to  that  period.  This  proportion  shall  be 
determined  according  to  a  rule  the  uniform  application  of  which 
through  the  interval  between  the  date  of  sale  and  the  date  of 
maturity  will  extinguish  the  discount  and  expense  on  funded 
debt.  The  charge  to  this  account  for  any  period  must  not  be 
either  greater  or  less  than  the  proportion,  of  the  balance  remain- 
ing unamortized  applicable  to  that  period  so  long  as  anj^  portion 
of  the  discount  and  expense  remains  unextinguished.  (See 
special  mstructions  for  balance-sheet  accounts,  section  3.) 

Note. — The  accounting  company  may,  at  its  option,  charge  to  profit 
and  loss  account  No.  617,  "Debt  discount  extinguished  through  surplus," 
all  or  any  portion  of  the  discount  and  expense  on  funded  debt  remaining 
at  any  time  unextinguished. 

549.  MAINTENANCE    OF    INVESTMENT    ORGANIZA- 
TION. 

This  account  shall  include  the  directly  assignable  organiza- 
tion and  administration  expenses  of  the  accounting  company 
which  are  incident  to  its  investments  in  leased  or  nonoperating 
physical  property,  and  in  stocks,  bonds,  or  other  securities. 

ITEMS  OF  EXPENSE 

Advertising  annual  reports  (lessor  companies  only). 
Calls  for  bonds  in  accordance  with  sinking  fund  provisions  of  mort- 
gages. 


418  APPENDIX  C 

Directors'  fees. 

Printing  and  mailing  dividend  checks. 

Publishing  and  mailing  annual  reports  and  other  corporate  state- 
ments to  shareholders. 

Publishing  notices  of  declaration  of  dividends. 

Law  expenses. 

Office  expenses. 

Salaries  of  officers,  clerks,  and  attendants. 

Stationery  and  printing. 

Note. — Organization  and  administration  expenses  incident  to  railway 
operation  are  provided  for  in  operating  expense  general  account  VII, 
General. 

550.  INCOME  TRANSFERRED  TO  OTHER  COMPANIES. 

This  account  shall  include  the  whole  or  any  portion  of  the 
income  of  the  accounting  company  payable  to  another  company 
under  the  terms  of  agreements  or  contracts  without  obligation 
for  reimbursement. 

In  determining  the  amount  payable  by  the  accounting  com- 
pany, consideration  shall  be  given  not  only  to  operating  revenues 
and  operating  expenses,  but  also  to  other  items  of  income  or 
deduction  which  affect  that  amount. 

Note  A. — The  amount  receivable  by  the  other  company  shall  be  cred- 
ited by  it  to  account  No.  512,  "Separately  operated  properties — Profit." 

Note  B. — Dividends  or  other  payments  upon  securities  issued  or 
assumed  by  the  accounting  company  shall  not  be  included  in  this  account. 

551.  MISCELLANEOUS  INCOME  CHARGES. 

This  account  shall  include  all  items  in  the  nature  of  fixed 
charges  properly  chargeable  to  Income  Account  for  a  fiscal 
period  not  provided  for  elsewhere,  such  as  "normal"  and  "addi- 
tional" income  tax  upon  the  interest  on  accounting  company's 
funded  debt  when  assumed  by  it. 

552.  INCOME  APPLIED  TO  SINKING  AND  OTHER  RE- 

SERVE FUNDS. 
This  account  shall  include  amounts  applied  to  sinking  and 
other  reserve  funds  from  income,  whether  definite  appropriations 
from  income;  allotments  or  pajmnents  of  definite  amounts  from 
income  under  the  terms  of  mortgages,  deeds  of  trust,  or  other 
contracts  that  provide  for  such  allotments  or  payments;  or 
accretions  representing  interest  or  other  returns  accrued  on  the 
contents  of  such  funds  and  required  to  be  retained  therein. 


APPENDIX  C  419 

Note  A. — The  amounts  charged  to  this  account  shall  be  concurrently 
credited  to  balance-sheet  accounts  Nos.  773,  781,  782,  and  783,  as  may 
be  appropriate. 

Note  B. — Similar  appropriations  made  from  surplus  shall  be  charged 
to  profit  and  loss  account  No.  613,  "Surplus  applied  to  sinking  and 
other  reserve  funds." 

653.  DIVIDEND  APPROPRIATIONS  OF  INCOME. 

This  account  shall  include  amounts  definitely  declared  pay- 
able from  the  income  of  the  fiscal  period,  as  dividends  on  ac- 
tually outstanding  capital  stock  issued  or  assumed  by  the  ac- 
counting company,  other  than  debenture  stock.  (See  definition 
of  the  several  classes  of  capital  stock  in  balance-sheet  account 
No.  751,  "Capital  stock.")  If  a  dividend  is  not  payable  in  cash 
the  consideration  shall  be  described  in  the  entry  with  sufficient 
particularity  to  identify  it. 

This  account  shall  be  subdivided  so  as  to  show  separately  the 
dividends  on  the  various  subclasses  of  capital  stock. 

Note  A. — Interest  accrued  on  debenture  stock  shall  be  charged  to 
account  No.  546,  "Interest  on  funded  debt." 

Note  B. — This  account  shall  not  include  charges  for  dividends  on 
capital  stock  issued  or  assumed  by  the  accounting  company  and  owned 
by  it,  whether  pledged  as  collateral,  or  held  in  its  treasury,  in  special 
deposits,  or  in  sinking  or  other  reserve  funds.-  (See  account  No.  552, 
"Income  applied  to  sinking  and  other  reserve  funds.") 

Note  C. — This  account  shall  be  used  when  the  appropriations  are 
definitely  made  chargeable  to  Income.  Similar  appropriations  made 
from  surplus  shall  be  charged  to  profit  and  loss  account  No.  614,  "Divi- 
dend appropriations  of  surplus." 

554.  INCOME  APPROPRIATED  FOR  INVESTMENT  IN 
PHYSICAL  PROPERTY. 

This  account  shall  include  amounts  definitely  appropriated 
from  income  to  be  applied  for  the  construction  or  acquisition  of 
new  lines  and  extensions  and  of  additions  to  and  betterments  of 
property  the  cost  of  which  is  chargeable  to  road  and  equipment 
accounts  or  applied  for  the  construction  or  acquisition  of  prop- 
erty the  cost  of  which  is  includible  in  balance-sheet  account 
No.  705,  "  Miscellaneous  physical  property." 

Records  of  the  accounting  carrier  shall  be  so  kept  that  the 
appropriations  charged  to  this  account  for  any  fiscal  period  may 
be  distinguished  as  relating  to  (a)  amounts  expended  during 


420  APPENDIX  C 

preceding  fiscal  periods,  (6)  amounts  expended  during  the  cur- 
rent fiscal  period,  and  (c)  amounts  held  in  reserve. 

The  records  shall  also  show  separately  appropriations  for 
investment  in  road  and  equipment  and  for  investment  in  mis- 
cellaneous physical  property. 

Note  A. — Similar  appropriations  made  from  surplus  shall  be  charged 
to  profit  and  loss  account  No.  615,  "Surplus  appropriated  for  investment 
in  physical  property." 

Note  B. — The  amounts  charged  to  this  account  shall  be  concurrently 
credited  to  balance-sheet  account  No.  779,  "Additions  to  property 
through  income  and  surplus,"  to  No.  782,  "  Miscellaneous  fund  reserves," 
or  to  No.  783,  "Appropriated  surplus  not  specifically  invested,"  as  may 
be  appropriate. 

555.  STOCK    DISCOUNT    EXTINGUISHED    THROUGH 

INCOME. 
This  account  shall  include  amounts  definitely  appropriated 
from  income  to  reduce  or  extinguish  the  amount  of  discount  on 
capital  stock  issued  by  the  accounting  company.    (See  balance- 
sheet  account  No.  724,  "Discount  on  capital  stock.") 

Note. — Similar  appropriations  made  from  surplus  shall  be  charged 
to  profit  and  loss  account  No.  616,  "Stock  discount  extinguished  through 
surplus." 

556.  MISCELLANEOUS  APPROPRIATIONS  OF  INCOME. 
Except  as  provided  in  account  No.  552,  "Income  applied  to 

sinking  and  other  reserve  funds,"  this  account  shall  include 
amounts  definitely  appropriated  from  income  for  the  discharge 
of  the  principal  (less  the  discount,  if  any,  suffered  at  the  time  of 
sale)  of  any  indebtedness  incurred  in  the  acquisition  or  improve- 
ment of  property  carried  in  the  road  and  equipment  accoimts; 
also  amounts  similarly  appropriated  to  provide  a  reserve  for 
doubtful  accounts,  and  for  other  purposes  not  provided  for  else- 
where. 

Note. — Similar  appropriations  made  from  surplus  shall  be  charged 
to  profit  and  loss  account  No.  618,  "Miscellaneous  appropriationa  of 
surplus." 


APPENDIX  C  421 

PROFIT  AND  LOSS  ACCOUNTS 

SPECIAL  INSTRUCTIONS 

Page 

1.  Profit  and  loss  accounts  defined 421 

2.  Delayed  items '. 422 

PRIMARY  ACCOUNTS 
I.  Credits: 

60L  Credit  balance  (at  beginning  of  fiscal  period).. .  422 

602.  Credit  balance  transferred  from  income 422 

603.  Profit  on  road  and  equipment  sold 423 

604.  Delayed  income  credits 423 

605.  Unrefundable  overcharges 423 

606.  Donations 423 

607.  Miscellaneous  credits 424 

II.  Debits: 

611.  Debit  balance  (at  beginning  of  fiscal  period).  . .  424 

612.  Debit  balance  transferred  from  income 425 

613.  Surplus  applied  to  sinking  and   other   reserve 

funds 425 

614.  Dividend  appropriations  of  surplus 425 

615.  Surplus  appropriated  for  investment  in  physical 

property 425 

616.  Stock  discount  extinguished  through  surplus. . .  426 

617.  Debt  discount  extinguished  through  surplus.  . . .  426 

618.  Miscellaneous  appropriations  of  surplus 426 

619.  Loss  on  retired  road  and  equipment 427 

620.  Delayed  income  debits 427 

621.  Miscellaneous  debits 427 

SPECIAL  INSTRUCTIONS 

1.  Profit  and  Loss  Accounts  Defined. — Profit  and  loss 
accoimts  are  those  designed  to  show  the  changes  in  the  corporate 
■urplus  or  deficit  during  each  fiscal  period,  as  effected  by  the 


422  APPENDIX  C 

operations  and  business  transactions  during  that  period,  by 
any  disposition  of  net  profits  made  solely  at  the  option  of  the 
accounting  company,  by  accounting  adjustments  of  matters  not 
properly  attributable  to  the  period,  or  by  miscellaneous  gains 
or  losses  not  provided  for  elsewhere;  and  to  show  also  the  un- 
appropriated surplus  of  the  carrier  at  the  date  of  the  balance 
sheet. 

2.  Delayed  Items. — When  no  provisions  have  been  made 
through  entries  in  the  operating  revenue,  operating  expense,  or 
other  income  accounts  for  anticipating  delayed  items  chargeable 
or  creditable  thereto,  and  the  amount  of  any  such  item  is  rela- 
tively so  large  that  its  inclusion  in  the  accounts  for  a  single  year 
would  seriously  distort  those  accounts,  the  carrier,  when  so 
authorized  upon  application  to  the  Interstate  Commerce  Com- 
mission, shall  distribute  to  Profit  and  Loss  so  much  of  the  amount 
as  may  be  authorized.  The  application  to  the  Commission  for 
exceptional  accounting  for  delayed  items  shall  give  full  par- 
ticulars concerning  each  item  and  the  reasons  which,  in  the 
carrier's  judgment,  indicate  the  need  for  a  special  accounting 
rule. 

Delayed  items  are  items  representing  transactions  which  oc- 
curred before  the  current  fiscal  year. 


TEXT  PERTAINING  TO  PROFIT  AND  LOSS 
ACCOUNTS 

I.  CREDITS. 

60L  CREDIT  BALANCE  (AT  BEGINNING  OF  FISCAL 
PERIOD). 
This  account  shall  include  the  net  credit  balance  in  the  Profit 
and  Loss  Account  at  the  beginning  of  the  fiscal  period. 

602.  CREDIT    BALANCE    TRANSFERRED    FROM    IN- 
COME. 
This  account  shall  show  the  net  credit  balance  brought  for- 
ward from  the  Income  Account  for  the  fiscal  period. 


APPENDIX  C  42S 

603.  PROFIT  ON  ROAD  AND  EQUIPMENT  SOLD. 

This  account  shall  include  the  proceeds  from  the  sale  of  road 
and  equipment  property  in  excess  of  the  amount  at  which  such 
property  was  carried,  in  the  property  account  at  the  time  of  sale. 

604.  DELAYED  INCOME  CREDITS. 

This  account  shall  include  relatively  large  credits  relating  to 
operating  revenue,  operating  expense,  and  other  income  ac- 
counts of  previous  fiscal  periods. 

This  account  shall  be  used  only  after  permission  of  the  Inter- 
state Commerce  Commission  has  been  obtained.  (See  section  3 
of  the  general  instructions  for  the  classification  of  operating 
revenues  and  operating  expenses,  section  2  of  the  special  instruc- 
tions for  income  accounts,  and  section  2  of  the  special  instruc- 
tions for  this  classification.) 

Note. — Except  as  provided  for  above,  delayed  items  relating  to 
operating  revenue,  operating  expense,  and  other  income  items  shall  be 
included  in  the  appropriate  revenue,  expense,  or  other  income  accounts 
for  the  fiscal  period  in  which  the  audit  of  the  items  occurs. 

605.  UNREFUNDABLE  OVERCHARGES. 

This  account  shall  include  the  amount  of  revenue  overcharges 
which  are  determined  during  the  current  fiscal  period  to  be  un- 
refundable.  (See  section  1  of  special  instructions  for  the  classifi- 
cation of  operating  revenues.) 

606.  DONATIONS. 

This  account  shall  include  amounts,  creditable  to  surplus,  of 
cash  or  its  equivalent  in  estimated  value  at  the  time  of  acquisi- 
tion of  lands  or  other  property  donated  by  individuals  or  com- 
panies for  the  construction  or  acquisition  of  property.  It  shall 
also  include  donations  made  by  individuals  and  companies  in 
connection  with  the  construction  of  new  lines  for  the  purpose  of 
compensating  the  carrier  for  loss  anticipated  during  the  early 
period  of  operation. 

Any  advances  made  by  individuals  or  companies  with  ab- 
solute or  conditional  provision  for  partial  or  complete  reim- 
bursement shall  not  be  considered  a  donation  prior  to  the  ful- 
filhnent  of  all  conditions,  and  then  only  to  the  extent  to  which 


424  APPENDIX  C 

the  liability  for  reimbursement  is  nullified  or  negatived.  Prior 
to  such  determination  the  amounts  received  shall  be  credited  in 
balance-sheet  account  No.  778,  "Other  unadjusted  credits." 

Note. — Donations  made  by  States,  municipalities,  and  other  public 
corporations  as  their  contributions  toward  the  construction  or  acquisi- 
tion of  property  shall  be  included  in  balance-sheet  account  No.  754, 
"Grants  in  aid  of  construction." 

607.  MISCELLANEOUS  CREDITS. 

This  account  shall  include  amounts,  not  provided  for  else- 
where, transferred  from  other  accounts  to  Profit  and  Loss,  and 
amounts  representing  increases  of  resources  not  properly  as- 
signable to  the  income  accounts.  Among  the  items  which  shaU 
be  included  in  this  account  are — 

Adjustments  or  cancellations  of  balance-sheet  accounts, 

Cancellation  of  balance-sheet  accounts  representing  unclaimed 
wages  and  vouchered  accounts  written  off  because  of  carrier's 
inability  to  locate  the  creditor, 

Profit  derived  from  the  sale  of  investment  securities. 

Profit  derived  from  the  sale  of  property  carried  in  balance- 
sheet  account  No.  705,  "  Miscellaneous  physical  property," 

Credits  resulting  from  adjustments  required  to  bring  to  par 
securities  issued  or  assumed  by  the  accounting  company  and 
reacquired  at  a  cost  less  than  the  par  value. 

Premiums  on  capital  stock  at  the  time  of  its  reacquirement 
(see  special  instructions  for  balance-sheet  accounts,  section  2), 

Unreleased  premiums  on  funded  debt  reacquired  before  ma- 
turity (see  special  instructions  for  balance-sheet  accounts, 
section  3), 

Collections  of  old  accounts  previously  written  off. 

Note. — Revenue  overcharges  when  determined  to  be  unrefundable 
shall  be  credited  to  account  No.  605,  "Unrefundable  overcharges." 

n.  DEBITS. 

611.  DEBIT  BALANCE    (AT   BEGINNING    OF   FISCAL 
PERIOD). 
This  account  shall  include  the  debit  balance  in  the  Profit  and 
Loss  Account  at  the  beginning  of  the  fiscal  period. 


APPENDIX  C  425 

612.  DEBIT  BALANCE  TRANSFERRED  FROM  INCOME. 
This  account  shall  show  the  net  debit  balance  brought  forward 

from  the  Income  Account  for  the  fiscal  period. 

613.  SURPLUS  APPLIED  TO  SINKING  AND  OTHER  RE- 

SERVE FUNDS. 
This  account  shall  include  amounts  definitely  appropriated 
from  surplus  and  applied  to  sinking  and  other  reserve  funds; 
and  allotments  or  payments  of  definite  amounts  from  surplus 
into  sinking  and  other  reserve  funds  under  the  terms  of  mort- 
gages, deeds  of  trust,  or  other  contracts  that  provide  for  such 
allotments  or  payments. 

Note  A. — The  amounts  charged  to  this  account  shall  be  concurrently 
credited  to  the  appropriate  balance-sheet  accounts. 

Note  B. — Similar  appropriations  made  from  income  shall  be  charged 
to  income  account  No.  652,  "Income  applied  to  sinking  and  other  re- 
serve funds." 

614.  DIVIDEND  APPROPRIATIONS  OF  SURPLUS. 

This  account  shall  include  amounts  definitely  declared  payable 
from  surplus  as  dividends  on  actually  outstanding  capital  stock 
issued  or  assumed  by  the  accounting  company,  other  than  de- 
benture stock.  (See  definition  of  the  several  classes  of  capital 
stock  in  balance-sheet  account  No.  751,  "Capital  stock.")  If 
a  dividend  is  not  payable  in  cash  the  consideration  shall  be 
described  in  the  entry  with  sufficient  particularity  to  identify  it. 

This  account  shall  be  subdivided  so  as  to  show  separately  the 
dividends  on  the  various  subclasses  of  capital  stock. 

Note  A. — Interest  accrued  on  debenture  stock  shall  be  charged  to 
income  account  No.  546,  "Interest  on  funded  debt." 

Note  B. — This  account  shall  not  include  charges  for  dividends  on 
capital  stock  issued  or  assumed  by  the  accounting  company  and  owned 
by  it,  whether  pledged  as  collateral  or  held  in  its  treasury,  in. special 
deposits,  or  in  sinking  or  other  reserve  funds.  (See  account  No.  613, 
"Surplus  applied  to  sinking  and  other  reserve  funds.") 

Note  C. — Similar  appropriations  made  from  income  shall  be  charged 
to  income  account  No.  553,  "Dividend  appropriations  of  income." 

615.  SURPLUS  APPROPRIATED  FOR  INVESTMENT  IN 

PHYSICAL  PROPERTY. 
This  account  shall  include  amounts  definitely  appropriated 
from  surplus,  to  be  applied  for  the  construction  or  acquisition 


426  APPENDIX  C 

of  new  lines  and  extensions  and  of  additions  to  and  betterments 
of  property  the  cost  of  which  is  includible  in  the  road  and  equip- 
ment accounts  or  applied  for  the  construction,  acquisition,  or 
improvement  of  property  the  cost  of  which  is  includible  in 
balance-sheet  account  No.  705,  "Miscellaneous  physical  prop- 
erty," and  also  the  amount  of  donations  in  aid  of  construction, 
made  by  individuals  and  companies,  not  subject  to  distribution 
as  dividends. 

Records  of  the  accounting  carrier  shall  be  so  kept  that  the 
appropriations  charged  to  this  account  for  any  fiscal  period  may 
be  distinguished  as  relating  to  (a)  amoimts  expended  during 
preceding  fiscal  periods,  (6)  amounts  expended  during  the  cur- 
rent fiscal  period,  and  (c)  amounts  held  in  reserve. 

Note  A. — Similar  appropriations  made  from  income  shall  be  charged 
to  income  account  No.  554,  "Income  appropriated  for  investment  in 
physical  property." 

Note  B. — The  amounts  charged  to  this  account  shall  be  concurrently 
credited  to  balance-sheet  account  No.  779,  "Additions  to  property 
through  income  and  surplus,"  to  No.  782,  "  Miscellaneous  fund  reserves," 
or  to  No.  783,  "Appropriated  surplus  not  specifically  invested,"  as  may 
be  appropriate. 

616.  STOCK    DISCOUNT    EXTINGUISHED    THROUGH 

SURPLUS. 

This  account  shall  include  amounts  definitely  appropriated 

from  surplus  to  reduce  or  extinguish  the  amount  of  discount  on 

capital  stock  issued  by  the  accounting  company.    (See  special 

instructions  for  balance-sheet  accounts,  section  2.) 

Note. — Similar  appropriations  made  from  income  shall  be  charged  to 
income  account  No.  555,  "Stock  discount  extinguished  through  income." 

617.  DEBT    DISCOUNT    EXTINGUISHED     THROUGH 

SURPLUS. 
This  account  shall  include  appropriations  of  surplus  made, 
at  the  option  of  the  accounting  company,  to  reduce  or  extinguish 
the  discount  and  expense  on  funded  debt.  (See  income  account 
No.  548,  "Amortization  of  discount  on  funded  debt,"  and 
balance-sheet  account  No.  725,  "  Discount  on  funded  debt.") 

618.  MISCELLANEOUS  APPROPRIATIONS  OF  SURPLUS. 
This  account  shall  include  amounts  definitely  appropriated 

from  surplus  to  provide  a  reserve  for  doubtful  accounts  and. 


APPENDIX  C  427 

except  as  provided  in  account  No.  613,  "Surplus  applied  to 
sinking  and  other  reserve  funds,"  for  the  discharge  of  the  prin- 
cipal (less  the  discount,  if  any,  suffered  at  the  time  of  sale)  of 
any  indebtedness  incurred  in  the  acquisition  or  improvement  of 
property  carried  in  the  road  and  equipment  accounts;  also 
other  amounts  appropriated  from  surplus  and  not  provided  for 
elsewhere. 

Note. — Similar  appropriations  from  income  shall  be  charged  to  in- 
come account  No.  556,  "Miscellaneous  appropriations  of  income." 

619.  LOSS  ON  RETIRED  ROAD  AND  EQUIPMENT. 

This  account  shall  include  charges  to  Profit  and  Loss  as  pro- 
vided for  in  the  classification  of  investment  in  road  and  equip- 
ment, on  account  of  (1)  road  which  has  been  abandoned,  sdd, 
or  otherwise  retired;  and  (2)  equipment  which  has  been  aban- 
doned, sold,  or  otherwise  retired.  (See  general  instructions, 
section  8,  and  general  account  II,  Equipment,  in  the  classifica- 
tion of  investment  in  road  and  equipment.) 

620.  DELAYED  INCOME  DEBITS. 

This  account  shall  include  relatively  large  debits  relating  to 
operating  revenue,  operating  expense,  and  other  income  ac- 
counts of  previous  fiscal  periods. 

This  account  shall  be  used  only  after  permission  of  the  Inter- 
state Commerce  Commission  has  been  obtained.  (See  section  3 
of  the  general  instructions  for  the  classification  of  operating 
revenues  and  operating  expenses,  section  2  of  the  special  instruc- 
tions for  the  income  accounts,  and  section  2  of  the  special  instruc- 
tions for  this  classification.) 

Note  A. — Except  as  provided  above,  delayed  items  relating  to  operat- 
ing revenue,  operating  expense,  and  other  income  items  shall  be  included 
in  the  appropriate  revenue,  expense,  or  other  income  account  for  the 
fiscal  period  in  which  the  audit  of  the  items  occurs. 

Note  B. — All  entries  in  this  account  shall  be  made  in  such  detail  aa 
will  indicate  the  operating  revenue,  operating  expense,  or  other  income 
accounts  to  which  they  relate. 

621.  MISCELLANEOUS  DEBITS. 

This  account  shall  include  amounts,  not  provided  for  else- 
where, chargeable  to  Profit  and  Loss  from  other  accounts, 
amount?  written  off  in  consequence  of  adjustments,  and  pay- 


428  APPENDIX  C 

ments  not  properly  chargeable  to  the  income  accounts.  Among 
the  items  which  shall  be  charged  to  this  account  are — 

Adjustments  or  cancellations  of  balance-sheet  accounts, 

Losses  or  deficits  not  properly  chargeable  to  Income,  such  as 
uncollectible  bills  (other  than  bills  covering  revenue  charges)  for 
wliich  no  reserve  has  been  provided, 

Losses  resulting  from  the  sale  of  investment  securities. 

Losses  resulting  from  the  sale,  destruction,  or  abandonment 
of  property  carried  in  balance-sheet  account  No.  705,  "Miscel- 
laneous physical  property," 

Debits  resulting  from  adjustments  required  to  bring  to  par 
securities  issued  or  assumed  by  the  accounting  company  and 
reacquired  at  a  cost  exceeding  the  par  value, 

Adjustments  of  the  difference  between  the  ledger  value  and 
estimated  value  of  land  withdrawn  from  railway  service  and 
charged  to  account  No.  705,  "Miscellaneous  physical  property." 
(See  general  instructions  in  the  classification  of  investment  in 
road  and  equipment,  section  10.) 

Discounts  on  stock  remaining  unextinguished  at  the  time  of 
its  reacquirement, 

Unextinguished  discounts  on  funded  debt  reacquired  before 
maturity, 

Pajnnents  of  old  accounts  previously  written  off, 

Penalties  and  fines  for  violation  of  the  Act  to  Regulate  Com- 
merce, or  other  Federal  laws,  when  not  specifically  provided  for 
elsewhere. 

Note. — Revenue  charges  when  determined  to  be  uncollectible  shall 
be  charged  to  income  account  No.  533,  "  Uncollectible  railway  revenues." 

GENERAL  BALANCE  SHEET  ACCOUNTS 


SPECIAL  INSTRUCTIONS 

Page 

1.  Balance-sheet  accounts 431 

2.  Discount  and  premium  on  capital  stock 431 

3.  Discount,  expense,  and  premium  on  funded  debt 432 

4.  Contingent  assets  and  liabilities 434 


APPENDIX  C  429 

Page 

5.  Book  value  of  securities  owned 434 

6.  Income  from  sinking  fund  assets 434 

7.  Current  assets 435 

8.  Joint  liabilities 435 

PRIMARY  ACCOUNTS 
Debits: 

701.  Investment  in  road  and  equipment 436 

702.  Improvements  on  leased  railway  property 436 

703.  Sinking  funds 437 

704.  Deposits  in  lieu  of  mortgaged  property  sold 437 

705.  Miscellaneous  physical  property 437 

706.  Investments  in  affiliated  companies 438 

707.  Other  investments 439 

708.  Cash 440 

709.  Demand  loans  and  deposits 440 

710.  Time  drafts  and  deposits 441 

711.  Special  deposits 441 

712.  Loans  and  bills  receivable 441 

713.  TralSic  and  car-service  balances  receivable 441 

714.  Net  balance  receivable  from  agents  and  conductors  542 

715.  Miscellaneous  accounts  receivable 442 

716.  Material  and  supplies 442 

717.  Interest  and  dividends  receivable 443 

718.  Rents  receivable 443 

719.  Other  current  assets 443 

720.  Working  fund  advances ". 443 

721.  Insurance  and  other  funds 443 

722.  Other  deferred  assets 444 

723.  Rents  and  insurance  premiums  paid  in  advance. .  444 

724.  Discount  on  capital  stock 444 

725.  Discount  on  funded  debt 444 

726.  Property  abandoned  chargeable  to  Operating  Ex- 

penses   445 

727.  Other  unadjusted  debits 445 

728.  Securities  issued  or  assumed — Unpledged 446 

729.  Securities  issued  or  assumed — Pledged 446 


430  APPENDIX  C 

Credits:  Page 

751.  Capital  stock 447 

752.  Stock  liability  for  conversion 449 

753.  Premium  on  capital  stock 449 

754.  Grants  in  aid  of  construction 449 

755.  Funded  debt  immatured 449 

756.  Receiver's  certificates 451 

757.  Nonnegotiable  debt  to  affiliated  companies 451 

758.  Loans  and  bills  payable 452 

759.  Traffic  and  car-service  balances  payable 453 

760.  Audited  accounts  and  wages  payable 453 

761.  Miscellaneous  accounts  payable 453 

762.  Interest  matured  unpaid 453 

763.  Dividends  matured  unpaid 454 

764.  Funded  debt  matured  unpaid 454 

765.  Unmatured  dividends  declared 454 

766.  Unmatured  interest  accrued 454 

767.  Unmatured  rents  accrued 454 

768.  Other  current  liabilities 454 

769.  Liability  for  provident  funds 455 

770.  Other  deferred  liabilities 455 

771.  Tax  liability 455 

772.  Premium  on  funded  debt 455 

773.  Insurance  and  casualty  reserves 455 

774.  Operating  reserves 456 

775.  Accrued  depreciation — Road 456 

776.  Accrued  depreciation — Equipment 456 

777.  Accrued    depreciation — Miscellaneous     physical 

property 457 

778.  Other  unadjusted  credits 457 

779.  Additions  to  property  through  income  and  surplus  457 

780.  Funded  debt  retired  through  income  and  surplus .  458 

781.  Sinking  fund  reserves 458 

782.  Miscellaneous  fund  reserves 459 

783.  Appropriated  surplus  not  specifically  invested .  .  .  459 

784.  Profit  and  loss— Balance 459 


APPENDIX  C  431 


SPECIAL  INSTRUCTIONS 

1.  Balance-sheet  Accounts.— Balance-sheet  accounts  are 
those  showing  the  assets,  liabilities,  and  corporate  surplus  or 
deficit  of  the  business. 

2.  Discount  and  Premium  on  Capital  Stock. — Ledger 
accounts  shall  be  provided  to  cover  the  discounts  and  premiums 
at  the  sale  or  resale  of  each  subclass  of  capital  stock  issued  or 
assumed  by  the  company.  The  total  of  the  net  debit  balances 
remaining  in  these  several  accounts  shall  be  included  in  account 
No.  724,  "Discount  on  capital  stock,"  and  the  total  of  the 
net  credit  balances  in  account  No.  753,  "Premium  on  capital 
stock."  For  explanation  of  siibclass  see  account  No.  751,  ''Capital 
stock." 

By  the  term  discount  is  meant  the  excess  of  the  par  value  of 
stocks  actually  issued  or  assumed  over  the  actual  money  value 
of  the  consideration  received  for  such  stocks.  By  the  term 
premium  is  meant  the  excess  of  the  actual  money  value  of  the 
consideration  received  for  stock  actually  issued  or  assumed  over 
the  par  value  of  such  stock. 

The  term  premium  is  not  intended  to  include  amounts  re- 
ceived representing  expected  dividends  considered  to  have  ac- 
crued since  the  last  dividend  period  in  case  of  stocks  on  which 
dividends  are  regularly  paid,  nor  is  discount,  as  above  defined, 
intended  to  be  diminished  by  any  such  amount  representing  ex- 
pected dividends  explicitly  stated  in  the  price  at  which  the  stock 
is  issued. 

Entries  in  these  accounts  representing  discounts  shall  be 
carried  therein  until  offset  (1)  by  premiums  realized  on  subse- 
quent sales  of  the  same  subclass  of  stock,  (2)  by  assessments 
levied  on  the  stockholders,  (3)  by  appropriations  of  income  or 
surplus  for  that  purpose,  or  (4)  by  charges  to  Profit  and  Loss 
upon  reacquirement  of  the  stock.  Entries  in  these  accounts 
representing  premiums  realized  shall  be  carried  therein  imtil 
offset  (1)  by  discounts  suffered  on  sales  of  the  same  subclass  of 
stock,  or  (2)  by  credits  to  Profit  and  Loss  upon  reacquirement 
of  the  stock. 


432  APPENDIX  C 

In  case  the  accounting  company  is  permitted  and  elects  to 
distribute  all  or  any  part  of  the  net  premium  on  its  capital  stock 
to  its  stockholders,  the  amount  thus  distributed  shall  be  charged 
to  the  premium  account. 

For  the  purpose  of  this  classification  the  premium  reahzed 
at  the  sale  of  capital  stock  shall  not  be  considered  a  profit 
and  loss  item,  except  upon  the  reacquirement  of  the  stock 
sold. 

In  no  case  shall  discount  on  capital  stock  be  charged  to  or 
included  in  any  account  as  a  part  of  the  cost  of  acquiring  any 
property,  tangible  or  intangible,  or  as  a  part  of  the  cost  of  opera- 
tion. 

When  stock  which  has  been  issued  or  assumed  by  the  ac- 
counting company  is  reacquired,  the  difference  between  the 
price  paid  and  the  par  value  of  the  stock  shall  be  credited  to 
profit  and  loss  account  No.  607,  "Miscellaneous  credits,"  or 
charged  to  account  No.  621,  "Miscellaneous  debits,"  as  may  be 
appropriate.  Concurrently  the  premium  or  discount  account 
for  the  particular  issue  of  stock  reacquired  shall  be  adjusted 
through  Profit  and  Loss  to  the  extent  of  the  premium  or  dis- 
count applicable  to  the  shares  reacquired.  In  case  the  premium 
realized  or  discount  suffered  at  the  prior  sale  of  the  stock  reac- 
quired has  been  included  in  an  asset  account  other  than  the 
premiums  and  discounts  account,  such  asset  account  shall  be 
concurrently  adjusted  through  Profit  and  Loss  to  the  extent 
of  the  premium  or  discount  previously  included  therein  with 
respect  to  the  shares  reacquired. 

3.  Discount,  Expense,  and  Premium  on  Funded  Debt. — 
Ledger  accounts  shall  be  provided  to  cover  the  discounts,  ex- 
pense, and  premiums  at  the  sale  or  resale  of  each  subclass  of 
funded  debt  and  of  receiver's  certificates  issued  for  the  benefit 
of  or  assumed  by  the  company.  For  explanation  of  subclass 
see  account  No.  755,  "Funded  debt  unmatured." 

By  the  term  discount  is  meant  the  excess  of  the  par  value  of 
funded  debt  securities  (of  whatever  kind)  issued  or  assumed,  and 
the  accrued  interest  thereon,  over  the  actual  cash  value  of  the 
consideration  received  for  such  securities. 

By  the  term  premium  is  meant  the  excess  of  the  actual  cash 


APPENDIX  C  433 

value  of  the  consideration  received  for  funded  debt  securities 
(of  whatever  kind)  issued  or  assumed  over  the  par  value  of  such 
securities  and  the  accrued  interest  thereon. 

By  the  term  expense  is  meant  all  expense  in  connection  with 
the  issue  and  sale  of  evidences  of  debt,  such  as  fees  for  drafting 
mortgages  and  trust  deeds;  fees  and  taxes  for  issuing  or  record- 
ing mortgages  and  trust  deeds;  cost  of  engraving  and  printing 
bonds,  certificates  of  indebtedness,  and  other  negotiable  paper 
having  a  life  of  more  than  one  year;  fees  paid  trustees  provided 
for  in  mortgages  and  trust  deeds;  fees  paid  for  legal  services  to 
trustees  relative  to  mortgage  securities;  fees  and  conmiissions 
paid  underwriters  and  brokers  for  marketing  such  evidences  of 
debt;  and  other  like  expense. 

The  total  of  the  net  debit  balances  remaining  in  these  several 
accounts  should  be  included  in  account  No.  725,  "Discount  on 
funded  debt,"  and  the  total  of  the  net  credit  balances  in  ac- 
count No.  772,  "  Premium  on  funded  debt." 

Each  fiscal  period  there  shall  be  charged  to  income  account 
No.  548,  "Amortization  of  discount  on  funded  debt,"  a  propor- 
tion (based  upon  the  ratio  of  such  fiscal  period  to  the  remaining 
life  of  the  respective  securities  reckoned  from  the  beginning  of 
the  period  to  the  date  of  maturity  of  the  debt  to  which  the 
charges  relate)  of  each  of  the  debit  balances  in  these  accounts, 
and  correspondingly  there  shall  be  credited  to  income  account 
No.  517,  "Release  of  premiums  on  funded  debt,"  a  similar  pro- 
portion of  each  of  the  credit  balances  in  these  accounts.  Carriers 
are  allowed  the  option  of  extinguishing  at  any  time,  through 
charges  to  Profit  and  Loss,  all  or  any  portion  of  the  debit  bal- 
ances remaining  in  any  of  these  accounts  and  of  deferring  the 
extinguishment  of  credit  balances  until  the  maturity  of  the  ob- 
ligations represented. 

When  any  funded  debt  which  has  been  actually  issued  to 
bona  fide  holders  for  value  is  reacquired  by  the  accounting  com- 
pany, that  proportion  of  the  balance  remaining  in  the  accounts 
containing  discount,  expense,  and  premium  on  funded  debt  for 
the  subclass  of  the  security  reacquired  applicable  to  the  portion 
reacquired  shall  be  credited  or  charged  thereto,  as  may  be  ap- 
propriate, and  concurrently  charged  or  credited  to  Profit  and 


434  APPENDIX  C 

Loss.  Such  proportion  shall  be  based  upon  the  ratio  of  the  par 
value  of  the  security  reacquired  to  the  par  value  of  all  the  securi- 
ties of  the  subclass  actually  outstanding  immediately  before  such 
reacquirement. 

In  case,  however,  the  premium  realized  or  discount  suffered  at 
the  prior  sale  of  the  securities  reacquired  has  been  included  (in 
excess  of  the  amount  authorized  in  the  text  of  road  and  equip- 
ment account  No.  76,  "Interest  during  construction")  in  an 
asset  account  other  than  the  premiums  and  discounts  account, 
such  asset  account  shall  be  concurrently  adjusted  through  Profit 
and  Loss  to  the  extent  of  such  excess  of  the  premium  or  discount 
previously  included  therein  with  respect  to  the  securities  re- 
acquired. 

Except  as  provided  for  in  road  and  equipment  account  No.  76, 
''Interest  during  construction,"  no  discount  and  expense  on 
funded  debt  shall  be  charged  to  or  included  in  any  account  as 
a  part  of  the  cost  of  acquiring  any  property,  tangible  or  intan- 
gible, or  as  a  part  of  the  cost  of  operation. 

4.  Contingent  Assets  and  Liabilities. — Contingent  assets 
and  liabilities  shall  not  be  included  in  the  body  of  the  balance- 
sheet  statement,  but  shall  be  shown  in  detail  in  a  supplementary 
statement  accompanying  the  balance-sheet  statement.  Con- 
tingent assets  are  those  without  value  to  the  accounting  com- 
pany until  the  fulfillment  of  conditions  regarded  as  uncertain. 
Contingent  liabilities  include  items  which  may,  under  certain 
conditions,  become  obhgations  of  the  company,  but  are  neither 
direct  nor  assumed  obligations  on  the  date  of  the  balance 
sheet. 

5.  Book  Value  of  Secueities  Owned. — The  accounting 
company  is  allowed  the  option  of  carrjnng  its  investments  in 
securities  other  than  those  issued  or  assumed  by  it  either  at 
cost  or  at  a  reasonable  valuation  other  than  cost.  In  recognition 
of  this  option  the  term  ledger  value  is  used  in  the  text  of  the  ac- 
counts representing  securities  owned. 

6.  Income  from  Sinking  Fund  Assets. — ^Accrued  interest 
on  uninvested  sinking  fund  cash  on  deposit  in  banks  or  trust 
companies,  and  accrued  interest  and  other  income  arising  from 
stocks,  bonds,  or  other  assets  held  in  sinking  and  reserve  funds 


APPENDIX  C  435 

shall  be  credited  to  account  No.  516,  "Income  from  sinking  and 
other  reserve  funds,"  and  when  required  by  the  mortgage  or 
other  provision  to  be  held  in  the  funds  shall  be  charged,  accord- 
ing to  the  character  of  the  funds,  to  account  No.  703,  "Sinking 
funds,"  or  to  account  No.  721,  "Insurance  and  other  funds," 
and  concurrently,  if  a  reserve  is  required,  an  equal  amount  shall 
be  charged  to  income  account  No.  552,  "Income  applied  to 
sinking  and  other  reserve  funds"  and  credited  to  account  No. 
773,  "Insurance  and  casualty  reserves,"  No.  781,  "Sinking 
fund  reserves,"  or  No.  782,  "Miscellaneous  fund  reserves,"  as 
the  case  may  require. 

7.  Current  Assets. — In  the  group  of  accounts  designated 
as  current  assets  (accounts  No.  708  to  No.  719,  inclusive)  there 
shall  not  be  included  any  item  the  ledger  value  of  which  is  not 
reasonably  assured  by  the  known  financial  condition  of  the 
debtor.  The  amount  of  any  item  of  a  current  character  but  of 
doubtful  value  shall  be  included  in  account  No.  722,  "Other 
deferred  assets,"  or  written  off  through  Profit  and  Loss,  as  may 
be  appropriate.  If  desirable  to  retain  a  record  of  the  item  in 
the  balance  sheet,  it  may  be  stated  at  a  nominal  value  in  account 
No.  722,  "Other  deferred  assets,"  the  difference  between  the 
full  amount  of  the  item  and  such  nominal  value  being  charged 
to  Profit  and  Loss. 

8.  Joint  Liabilities. — ^The  accounting  company  shall  state 
as  a  liability  in  its  balance  sheet  the  total  par  value  of  securities 
jointly  issued  by  it  and  others,  and  it  shall  include  in  account 
No.  722,  "Other  deferred  assets,"  the  portion  of  such  liabihty 
which,  under  the  joint  arrangement,  it  is  expected  will  be  liqui- 
dated by  the  other  party  or  parties  to  the  joint  arrangement. 


436  APPENDIX  C 


TEXT  PERTAINING  TO  GENERAL  BALANCE 
SHEET  ACCOUNTS 


DEBITS. 

701.  INVESTMENT  IN  ROAD  AND  EQUIPMENT. 

This  account  shall  include  the  accounting  company's  invest- 
ment in  road  and  equipment  (including  that  held  under  contract 
for  purchase)  in  existence  at  the  date  of  the  balance  sheet.  The 
accounting  company's  records  shall  be  kept  in  such  manner  as 
to  show  the  amount  credited  to  this  account  subsequent  to 
June  30,  1914,  for  property  retired,  the  cost  of  which  was  in- 
cluded in  the  account  of  that  date. 

Note  A. — This  account  shall  not  include  any  items  representing  titles 
to  securities. 

Note  B. — When  any  equipment  is  acquired  under  an  agreement  which 
provides  that  the  cost  shall  be  paid  in  installments,  the  cost  (its  money 
value  at  time  of  purchase)  shall  be  charged  to  the  appropriate  road  and 
equipment  accounts  at  the  time  of  its  acquisition,  and  included  in  this 
account  in  the  same  manner  as  the  cost  of  equipment  purchased  outright. 
When  the  par  value  of  notes  or  other  securities  issued  in  payment,  or 
in  part  payment,  for  such  equipment  is  more  (or  less)  than  the  actual 
cash  value  of  the  equipment  at  the  time  of  the  purchase,  or  of  the  pro- 
portion to  which  the  securities  are  applicable,  the  difference  between 
the  par  value  of  the  securities  and  the  actual  cash  value  of  the  equip- 
ment, or  of  the  proportion  paid  for  by  the  securities,  shall  be  charged  (or 
credited)  to  the  proper  discount  and  premium  accounts. 

702.  IMPROVEMENTS  ON  LEASED  RAILWAY  PROP- 

ERTY. 
This  account  shall  include  the  accounting  company's  invest- 
ment in  additions  and  betterments  made  by  it  to  railway  prop- 
erty held  under  long-term  lease  or  through  control  of  the  cor- 
poration owning  the  property  and  in  existence  at  the  date  of 
the  balance  sheet.  The  accounting  company's  records  shall 
be  kept  in  such  manner  as  to  show  the  amount  credited  to  this 
account  subsequent  to  June  30,  1914,  for  property  retired,  the 
cost  of  which  was  included  in  the  account  at  that  date.  The 
amounts  included  in  this  account  shall  be  classified  in  the  ao- 


APPENDIX  C  437 

counts  provided  in  the  classification  for  investment  in  road  and 
equipment. 

Note. — This  account  shall  not  include  any  items  representing  titles 
to  securities. 

703.  SINKING  FUNDS. 

This  account  shall  include  the  amount  of  cash,  the  ledger 
value  of  live  securities  of  other  companies,  and  other  assets 
which  are  held  by  trustees  of  sinking  and  other  funds  for  the 
purpose  of  redeeming  outstanding  obligations,  including  such 
assets  so  held  in  the  hands  of  the  accounting  company's  treasurer 
when  the  assets  are  segregated  in  a  distinct  fund;  also  amounts 
deposited  with  such  trustees  on  account  of  mortgaged  property 
sold  the  proceeds  of  which  are  to  be  held  for  the  redemption  of 
securities,  and  the  par  value  of  live  securities  issued  or  assumed 
by  the  accounting  company  and  held  in  such  funds.  A  separate 
account  shall  be  kept  for  each  fund.  The  title  of  each  such 
account  shall  designate  the  obligation  in  support  of  which  the 
fund  is  created. 

Note. — In  stating  the  balance  sheet  in  the  annual  reports  to  the  Com- 
mission the  total  amount  of  the  funds  and  the  par  value  of  securities 
issued  or  assumed  by  the  accounting  company  and  held  in  the  funds  shall 
be  shown  in  the  short  columns,  and  the  net  amount  of  the  funds  (total 
amount  less  securities  issued  or  assumed)  shall  be  shown  in  the  long 
column. 

704.  DEPOSITS  IN  LIEU  OF  MORTGAGED  PROPERTY 

SOLD. 
This  account  shall  include  funds  deposited  with  trustees,  to  be 
held  until  mortgaged  property  sold  is  replaced. 

Note. — In  stating  the  balance  sheet  in  the  annual  reports  to  the 
Commission  the  total  amount  of  the  funds  and  the  par  value  of  securi- 
ties issued  or  assumed  by  the  accounting  company  and  held  in  the  funds 
shall  be  shown  in  the  short  columns,  and  the  net  amount  of  the  funds 
(total  amount  less  securities  issued  or  assumed)  shall  be  shown  in  the 
long  column. 

705.  MISCELLANEOUS  PHYSICAL  PROPERTY. 

This  account  shall  include  the  accounting  company^s  invest- 
ments in  physical  property  other  than  transportation  property 
assignable  to  accounts  Nos.  701  and  702,  including  hotels,  res- 
taurants, conunercial  power  plants,  etc.,  which  are  entirely  dis- 


438  APPENDIX  C 

tinct  from  transportation  property  and  are  not  operated  in 
connection  with  the  transportation  service  of  the  accounting 
company. 

ITEMS    OF  INVESTMENT 

Coal  and  other  mines.  Mineral  and  timber  lands. 

Commercial  power  plants.  Rails    and    other    track    material 

Hotels  and  restaurants.  leased  to  others. 

Lands  and  buildings  not  used  in  Sawmills  and  other  manufacturing 

transportation  operations.  plants  not  operated  in  connec- 

Lands  and  other  property  acquired  tion  with  transportation  service, 
and  held  in  anticipation  of  fu- 
ture use. 

706.  INVESTMENTS  IN  AFFILIATED  COMPANIES. 

This  account  shall  include  the  ledger  value  of  the  accounting 
company's  investment  advances  to  affiliated  companies,  also 
of  its  investment  in  securities  issued  or  assumed  by  such  com- 
panies, such  securities  not  being  held  in  special  deposits  or  in 
special  funds. 
This  account  shall  be  subdivided: 
(o)  Stocks. 
(6)  Bonds. 

(c)  Notes,  including  herein  not  only  notes  that  run  longer 
than  one  year  and  all  notes  of  affiliated  companies  held  as  in- 
vestments, but  also  notes  payable  on  demand  or  within  one 
year  from  the  date  of  issue  when  it  is  mutually  understood 
and  intended  that  the  notes  shall  not  be  enforced  as  current 
assets. 

(d)  Advances. 

The  accounting  company^s  record  shall  be  kept  in  such  manner 
that  the  ledger  value  of  securities  pledged  as  collateral  security 
for  any  of  the  accounting  company's  funded  debt  or  short-term 
loans  and  the  ledger  value  of  securities  unpledged  may  be  shown 
separately  in  the  annual  report  to  the  Commission. 

Note  A. — Accounts  with  aflSliated  companies  which  are  subject  to 
current  settlements,  such  as  traffic  and  car-service  balances,  charges 
for  material  and  supplies  currently  furnished,  charges  for  repairs  to 
equipment,  etc.,  shall  be  classed  as  current  assets  or  current  liabilities, 
as  may  be  appropriate. 

Note  B. — The  term  affiliated  companies  includes: 

1.  Controlled  companies,  including  companies  solely  controlled  by 


APPENDIX  C  439 

the  accounting  company,  and  also  companies  jointly  controlled  by  the 
accounting  company  and  others  under  a  joint  arrangement. 

2.  Controlling  companies,  including  both  companies  solely  controlling 
the  accounting  company,  and  companies  which  jointly  control  the  ac- 
counting company  under  a  joint  arrangement. 

3.  Companies  controlled  by  controlled  companies. 

4.  Companies  controlled  by  controlling  companies. 

By  control  is  meant  the  ability  to  determine  the  action  of  a  corporation. 
For  the  purposes  of  this  account,  the  following  are  to  be  considered 
forms  of  control: 

(a)  Right  through  title  to  securities  issued  or  assumed  to  exercise  the 
major  part  of  the  voting  power  in  the  controlled  corporation. 

(6)  Right  through  agreement  of  some  character  or  through  some 
source  other  than  title  to  securities,  to  name  the  majority  of  the  board 
of  directors,  managers,  or  trustees  of  the  controlled  corporation. 

(c)  Right  to  foreclose  a  first  lien  upon  all  or  a  major  part  in  value  of 
the  tangible  property  of  the  controlled  corporation. 

(d)  Right  to  secure  control  in  consequence  of  advances  made  for  con- 
struction of  the  operating  property  of  the  controlled  corporation. 

(e)  Right  to  control  only  in  a  specific  respect  the  action  of  the  con- 
trolled corporation. 

A  leasehold  interest  in  the  property  of  a  corporation  is  not  to  be  classed 
as  a  form  of  control  over  the  lessor  corporation. 

Sole  control  is  that  which  rests  in  one  corporation. 

Joint  control  is  that  which  rests  in  two  or  more  corporations  and  which 
is  held  under  a  joint  arrangement. 

Note  C. — The  value  of  securities  borrowed  by  the  accounting  com- 
pany and  pledged  shall  not  be  included  in  this  account. 

Note  D. — The  value  of  securities  pledged  for"  purposes  other  than 
that  of  security  for  funded  debt  or  short-term  loans  shall  be  included 
in  account  No.  703,  "Sinking  funds,"  No.  704,  "Deposits  in  lieu  of 
mortgaged  property  sold,"  No.  711,  "Special  deposits,"  or  No.  721, 
"Insurance  and  other  funds,"  as  may  be  appropriate. 

707.  OTHER  INVESTMENTS. 

This  account  shall  include  the  ledger  value  of  the  accounting 
company's  investment  advances  to  nonaffiliated  companies  and 
to  individuals,  and  of  its  investment  in  securities  issued  or  as- 
sumed by  such  companies,  such  securities  not  being  held  in 
special  deposits  or  in  special  funds;  also  miscellaneous  invest- 
ments not  provide  for  elsewhere. 
This  account  shall  be  subdivided: 
(o)  Stocks. 
lb)  Bonds. 

(c)  Notes,  including  herein  not  only  notes  that  run  longer 
than  one  year  and  all  notes  of  nonaffiliated  companies  and  of 
individuals  held  as  investments,  but  also  notes  payble  on  de- 


440  APPENDIX  C 

mand  or  within  one  year  from  date  of  issue  when  it  is  mutually 
understood  and  intended  that  the  notes  shall  not  be  enforced  as 
current  assets.    . 

(d)  Advances. 

(e)  Miscellaneous. 

The  accounting  company's  records  shall  be  kept  in  such 
manner  that  the  ledger  value  of  securities  pledged  as  collateral 
security  for  any  of  the  accoimting  company's  funded  debt  or 
short-term  loans  and  the  ledger  value  of  securities  unpledged 
may  be  shown  separately  in  the  annual  report  to  the  Com- 
mission. 

Note  A. — Accounts  with  nonaflSliated  companies  which  are  subject 
to  current  settlements,  such  as  trafl&c  and  car-service  balances,  charges 
for  materials  and  supplies  currently  furnished,  charges  for  repairs  to 
equipment,  etc.,  shall  be  classed  as  current  assets  or  current  liabilities, 
as  may  be  appropriate. 

Note  B, — The  term  nonaffiliated  companies  includes  all  companies 
other  than  those  defined  as  affihated  in  Note  B  of  account  No.  706, 
"Investments  in  affiliated  companies." 

Note  C. — The  value  cf  securities  borrowed  by  the  accounting  com- 
pany and  pledged  shall  not  be  included  in  this  account. 

Note  D. — The  value  of  securities  pledged  for  purposes  other  than 
that  of  security  for  funded  debt  or  short-term  loans  shall  be  included 
in  account  No.  703,  "Sinking  funds,"  No.  704,  "Deposits  in  lieu  of 
mortgaged  property  sold,"  No.  711,  "Special  deposits,"  or  No.  721, 
"Insurance  and  other  funds,"  as  may  be  appropriate. 

708.  CASH. 

This  account  shall  include  money,  checks,  sight  drafts,  and 
sight  bills  of  exchange  in  the  hands  of  the  accounting  company's 
financial  officers  and  agents,  or  in  transit  from  its  agents  and 
conductors  for  which  such  agents  and  conductors  have  received 
credit.  It  shall  also  include  deposits  with  banks  and  trust  com- 
panies subject  to  check.    (See  special  instructions,  section  7.) 

709.  DEMAND  LOANS  AND  DEPOSITS. 

This  account  shall  include  the  amount  of  demand  loans  fully 
secured  by  stocks,  bonds,  and  other  marketable  collateral,  and 
of  deposits  with  banks  and  trust  companies  when  such  items 
are  subject  to  collection  on  demand.  (See  special  instructions, 
section  7.) 


APPENDIX  C  441 

710.  TIME  DRAFTS  AND  DEPOSITS. 

This  account  shall  include  the  amount  of  time  drafts  receivable 
and  time  deposits  with  banks  and  trust  companies.  (See  special 
instructions,  section  7.) 

711.  SPECIAL  DEPOSITS. 

This  account  shall  include  funds  specially  deposited  (other 
than  in  sinking  funds)  for  the  payment  of  dividends,  interest, 
and  other  debts;  also  money  and  securities  deposited  to  insure 
the  performance  of  contracts  to  be  performed  within  one  year 
from  the  date  of  the  balance  sheet;  and  other  deposits  of  a 
special  nature  not  provided  for  elsewhere.  (See  special  instruc- 
tions, section  7.) 

Note  A. — Securities  pledged  as  collateral  for  the  accounting  com- 
pany's funded  debt  or  short-term  loans  shall  be  included  in  accordance 
with  the  character  of  the  securities  pledged  in  accounts  Nos.  706,  707 
or  729. 

Note  B. — In  stating  the  balance  sheet  in  the  annual  reports  to  the 
Commission  the  total  amount  of  the  funds  and  the  par  value  of  securities 
issued  or  assumed  by  the  accounting  company  and  held  in  the  funds 
shall  be  shown  in  the  short  columns,  and  the  net  amount  of  the  funds 
(total  amount  less  securities  issued  or  assumed)  shall  be  shown  in  the 
long  column. 

712.  LOANS  AND  BILLS  RECEIVABLE. 

This  account  shall  include  the  book  value  of  all  collectible 
obligations  in  the  form  of  demand  or  time  loans  and  bills  receiv- 
able, or  other  similar  evidences  (except  interest  coupons)  of 
money  receivable  within  a  time  not  exceeding  one  year  from 
date  of  issue.    (See  special  instructions,  section  7.) 

Note  A. — This  account  does  not  include  obligations  which  mature 
more  than  one  year  after  date  of  issue,  or  demand  or  short-term  notes 
held  as  investments  includible  in  accounts  Nos.  706  and  707. 

Note  B. — Demand  loans  fully  secured  by  stocks,  bonds,  or  other 
marketable  collateral  shall  be  included  in  account  No.  709,  "Demand 
loans  and  deposits." 

713.  TRAFFIC    AND    CAR-SERVICE    BALANCES    RE- 

CEIVABLE. 

This  account  shall  include  the  net  amount  receivable  from 
other  companies,  against  each  of  which  there  is  a  net  debit  bal- 
ance in  the  total  of  the  accounts  representing  interline  freight, 
passenger,  and  baggage  revenues,  and  charges  for  equipment 


442  APPENDIX  C 

interchanged  on  a  per  diem  or  a  mileage  basis.  (See  special 
instructions,  section  7.) 

Note. — The  amount  to  be  entered  in  this  account  is  not  the  net 
balance  between  this  account  and  account  No.  759,  "Traffic  and  car- 
service  balances  payable." 

714.  NET  BALANCE  RECEIVABLE  FROM  AGENTS  AND 

CONDUCTORS. 

This  account  shall  include  the  net  balance  due  in  ciurent  ac- 
counts from  agents,  from  train,  sleeping  car,  and  dining  car 
conductors,  and  from  train  collectors,  train  auditors,  porters, 
and  other  employees  and  representatives  charged  with  the  collec- 
tion or  custody  of  current  revenues.  (See  special  instructions, 
section  7.) 

Note. — Amounts  advanced  to  general  and  special  agents  as  working 
funds  shall  not  be  included  in  this  account,  but  in  account  No.  720, 
"Working  fund  advances." 

715.  MISCELLANEOUS  ACCOUNTS  RECEIVABLE. 
This  account  shall  include  amounts  due  in  audited  accounts 

considered  good,  such  as  those  due  from  the  United  States  or 
other  Governments  for  the  transportation  of  mails  and  Govern- 
ment property,  and  from  express  companies  for  express  facihties 
furnished  under  contract;  amounts  due  from  other  carriers  on 
account  of  freight  claims  paid;  miscellaneous  bills  against  other 
railway  companies,  corporations,  firms,  and  individuals,  and 
other  similar  items.    (See  special  instructions,  section  7.) 

Note. — The  amount  to  be  entered  in  this  account  is  not  the  net 
balance  between  this  account  and  account  No.  761,  "Miscellaneous  ac- 
counts payable." 

716.  MATERIAL  AND  SUPPLIES. 

This  account  shall  include  the  balances  representing  the  cost, 
less  depreciation,  if  any,  of  all  unapplied  material,  such  as  road 
and  shop  material,  articles  in  process  of  manufacture  by  the 
accounting  company,  fuel,  stationery,  and  dining  car  and  other 
supplies.  In  determining  the  cost  of  material  and  supplies  suit- 
able allowance  shall  be  made  for  any  discounts  allowed  in  the 
purchase  thereof. 

Note. — Balances  representing  the  cost  of  unapplied  construction 
material  and  supplies  located  at  the  point  of  use,  which  have  been  pur- 


APPENDIX  C  443 

chased  for  projected  new  roads  and  extensions,  are  provided  for  in  road 
and  equipment  account  No.  47,  "Unapplied  construction  material  and 
supplies." 

717.  INTEREST  AND  DIVIDENDS  RECEIVABLE. 

This  account  shall  include  the  amount  of  interest  accrued  to 
the  date  of  the  balance  sheet  on  bonds  owned  and  on  loans  made, 
the  amount  of  dividends  declared  on  stocks  owned,  and  divi- 
dends accrued  on  such  stocks  when  contracts  require  that  the 
dividends  be  paid  at  stated  times.  (See  special  instructions, 
section  7.) 

Note  A. — No  amount  representing  interest  or  dividends  receivable 
shall  be  included  in  this  account  unless  its  payment  is  reasonably  assured 
by  past  experience,  anticipated  provision,  or  otherwise. 

Note  B. — No  dividends  or  other  returns  on  securities  issued  or  as- 
sumed by  the  accounting  company  shall  be  included  in  this  account. 

718.  RENTS  RECEIVABLE. 

This  account  shall  include  rents  receivable  accrued  to  the  date 
of  the  balance  sheet  under  leases  and  not  includible  in  account 
No.  715,  "Miscellaneous  accounts  receivable."  It  is  not  re- 
quired that  minor  rents  shall  be  accounted  for  upon  an  accrual 
basis.    (See  special  instructions,  section  7.) 

719.  OTHER  CURRENT  ASSETS. 

This  account  shall  include  items  of  current  assets  not  covered 
by  accounts  Nos.  708  to  718,  inclusive. 

It  shall  include  asset  items  that  have  not  yet  reached  the  stage 
of  audited  accounts  and  become  classable  in  account  No.  715, 
and  yet  have  been  advanced  beyond  the  stage  of  accounts  prop- 
erly classable  in  account  No.  722.  (See  special  instructions, 
section  7.) 

720.  WORKING  FUND  ADVANCES. 

This  account  shall  include  amounts  advanced  to  general  and 
special  agents,  and  to  other  officers  and  employees,  as  working 
funds  from  which  certain  expenditures  are  to  be  made  and  ac- 
counted for.  It  also  includes  advances  to  fast  freight  lines  and 
to  demurrage  and  other  bureaus. 

721.  INSURANCE  AND  OTHER  FUNDS. 

This  account  shall  include  the  amount  of  cash  and  the  ledger 
value  of  securities  of  other  companies  and  other  assets  which  ear 


444  APPENDIX  C 

in  the  hands  of  trustees  or  managers  of  insurance,  employees' 
pension,  savings,  relief,  hospital,  and  other  funds  which  have 
been  raised  and  specifically  set  aside  or  invested  for  specific 
purposes  not  provided  for  elsewhere;  also  the  par  value  of  securi- 
ties issued  or  assumed  by  the  accoimting  company  and  held  in 
such  funds.   A  separate  account  shall  be  kept  for  each  fund. 

Note  A. — Sinking  funds  and  special  deposits  for  the  retirement  of 
obligations  are  provided  for  in  accounts  No.  703  and  No.  711,  respec- 
tively. 

Note  B. — In  stating  the  balance  sheet  in  the  annual  reports  to  the 
Commission  the  total  amount  of  the  funds  and  the  par  value  of  securi- 
ties issued  or  assumed  by  the  accounting  company  and  held  in  the  funds 
shall  be  shown  in  the  short  columns,  and  the  net  amount  of  the  funds 
(total  amount  less  securities  issued  or  assumed)  shall  be  shown  in  the 
long  column. 

Note  C. — This  account  shall  not  include  funds  held  by  the  account- 
ing company  solely  as  trustee  and  in  which  it  has  no  beneficial  interest. 

722.  OTHER  DEFERRED  ASSETS. 

This  account  shall  include  items  of  deferred  assets  not  covered 
by  accounts  No.  720  and  No.  721. 

723.  RENTS  AND   INSURANCE    PREMIUMS  PAID   IN 

ADVANCE. 

This  account  shall  include  the  balances  in  the  accounts  repre- 
senting prepaid  rents  chargeable  to  the  appropriate  rent  accounts 
under  Income  as  the  term  is  consumed  for  which  the  rents  are 
paid;  also  insurance  premiums  paid  in  advance  of  their  accrual, 
which  premiums  are  to  be  apportioned  and  charged,  as  they 
accrue,  to  appropriate  accounts. 

724.  DISCOUNT  ON  CAPITAL  STOCK. 

This  account  shall  include  the  total  of  the  net  debit  balances 
in  the  discount  and  premium  accounts  for  the  several  subclasses 
of  capital  stock.    (See  special  instructions,  section  2.) 

725.  DISCOUNT  ON  FUNDED  DEBT. 

This  account  shall  include  the  total  of  the  net  debit  balances 
in  the  discount,  expense,  and  premium  accounts  for  the  several 
subclasses  of  funded  debt.    (See  special  instructions,  section  3.) 


APPENDIX  C  445 

726.  PROPERTY  ABANDONED  CHARGEABLE  TO  OP- 

ERATING EXPENSES. 

This  account  is  intended  as  a  suspense  account,  in  which  may 
be  included  amounts  chargeable  to  Operating  Expenses  for  fixed 
improvements  abandoned  directly  in  connection  with  improve- 
ment or  betterment  work  which  are  relatively  large  and  the 
inclusion  of  which  in  the  carrier's  accounts  for  a  single  year 
would  seriously  distort  the  accounts.  It  is  to  be  used  only  after 
permission  of  the  Interstate  Commerce  Commission  has  been 
asked  and  given.  The  carrier,  in  its  application  to  the  Commis- 
sion, shall  give  full  particulars  concerning  the  property  retired, 
the  amount  chargeable  to  Operating  Expenses,  and  the  period 
over  which,  in  its  judgment,  the  amount  of  such  charge  should 
be  distributed. 

For  each  item  remaining  at  the  close  of  the  year  in  this  account 
the  accounting  carrier  shall  indicate  in  its  annual  report  to  the 
Commission,  with  respect  to  each  item  of  property  abandoned, 
the  period  over  which  it  is  proposed  to  distribute  the  balance 
relating  to  the  item,  the  date  of  the  abandonment  of  the  prop- 
erty, and  the  total  amount  originally  to  be  charged  to  Operating 
Expenses. 

727.  OTHER  UNADJUSTED  DEBITS. 

This  account  shall  include  the  amount  of  debit  balances  in 
suspense  accounts  that  can  not  be  entirely  cleared  and  disposed 
of  until  additional  information  is  received,  such  as  freight  claims 
paid  when  found  to  be  correct,  but  in  advance  of  investigation 
with  other  carriers;  interest  paid  in  advance;  debit  balances  in 
clearing  accounts,  such  as  "Shop  expenses,"  "Store  expenses," 
"Operations  of  gravel  pits,"  and  "Operations  of  quarries"; 
items  credited  to  Operating  Revenues  or  Operating  Expenses 
on  an  estimate  basis  in  accordance  with  general  instructions  for 
the  classification  of  operating  revenues  and  operating  expenses, 
section  2;  unextinguished  discount  on  short-term  notes;  esti- 
mated accrued  depreciation  on  equipment  leased  (see  general 
instructions,  section  2);  unadjusted  debit  items  not  provided 
for  in  accounts  Nos.  724,  725,  and  726,  and  other  similar  items, 


446  APPENDIX  C 

728.  SECURITIES  ISSUED  OR  ASSUMED— UNPLEDGED. 
This  account  shall  include  the  par  value  of  securities  issued  by 

the  accounting  company  and  the  par  value  of  securities  issued 
by  other  companies  and  assumed  by  the  accounting  company, 
that  are  held  unpledged  in  the  company's  treasury  or  by  its 
agents  or  trustees,  except  trustees  of  sinking  or  other  similar 
funds. 

This  account  shall  be  divided  into  (a)  Stocks,  and  (6)  Bonds 
and  other  evidences  of  funded  debt,  each  of  which  divisions  shall 
be  further  so  subdivided  that  in  the  company's  annual  report 
to  the  Commission  may  be  shown  (1)  amount  nominally  but  not 
actually  issued,  and  (2)  amount  nominally  outstanding. 

Note  A. — The  term  securities,  as  used  in  this  account,  includes  all 
authorized  certificates  of  stock  and  evidences  of  indebtedness  which 
have  been  signed,  sealed,  and,  when  required,  certified  by  the  registrar 
or  by  the  trustees  under  the  mortgage  or  contract,  and  are  not  short- 
term  securities.  By  short-term  securities  are  meant  those  which  are  pay- 
able on  demand  or  which  mature  not  more  than  one  year  from  date  of 
issue.    (See  also  Notes  B  to  accounts  Nos.  751  and  755.) 

Note  B. — This  account  shall  not  include  securities  that  are  merely 
guaranteed. 

Note  C. — This  account  shall  not  include  any  securities  held  in  sink- 
ing and  other  reserve  funds. 

Note  D. — In  the  general  balance-sheet  statement  the  balance  in  this 
account  shall  be  stated  in  the  short  column  only. 

Note  E. — When  any  securities  have  been  actually  issued  to  bona 
fide  holders  for  value,  or  after  issue  by  another  company  have  been  as- 
sumed by  the  accounting  company,  and  after  such  issue  or  assumption 
are  reacquired  under  circumstances  which  require  that  they  shall  not  be 
treated  as  canceled  or  retired,  they  shall  be  included  in  this  account  at 
par  value;  the  difference  between  the  par  value  and  the  amount  paid  in 
reacquiring  such  securities  shall  be  debited  (or  credited,  as  the  case  may 
be)  to  Profit  and  Loss.  If  such  securities  are  subsequently  pledged,  they 
shall  be  included  in  account  No.  729,  "Securities  issued  or  assumed — 
Pledged."    (See  special  instructions,  sections  2  and  3.) 

729.  SECURITIES  ISSUED  OR  ASSUMED— PLEDGED. 

This  account  shall  include  the  par  value  of  that  portion  of 
securities  pledged  by  the  accounting  company  as  collateral  se- 
curity for  any  of  its  funded  debt  or  short-term  loans,  which  con- 
sists of  securities  issued  by  the  accounting  company  and  securi- 
ties issued  by  other  companies,  the  obligation  for  payment  of 
which  has  been  assumed  by  the  accounting  company.  This  ac- 
count shall  be  subdivided  into  (o)  Stocks,  and  (6)  Bonds  and 


APPENDIX  C  447 

other  evidences  of  funded  debt,  each  of  which  divisions  shall  be 
further  so  divided  that  in  the  company's  annual  report  to  the 
Commission  may  be  shown  (1)  the  amount  nominally  but  not 
actually  issued,  and  (2)  the  amount  nominally  outstanding. 

Note  A. — The  term  securities  as  used  in  this  account  includes  all  au- 
thorized certificates  of  stock  and  evidences  of  indebtedness  which  have 
been  signed,  sealed,  and,  when  required,  certified  by  the  registrar  or  by 
the  trustees  under  the  mortgage  or  contract,  and  are  not  short-term 
securities.  By  short-term  securities  are  meant  those  which  are  payable 
on  demand  or  which  mature  not  more  than  one  year  from  date  of  issue. 
(See  also  Notes  B  to  accounts  Nos.  751  and  755.) 

Note  B. — This  account  shall  not  include  securities  that  are  merely 
guaranteed. 

Note  C. — This  account  shall  not  include  securities  which  have  been 
borrowed  by  the  accounting  company  and  pledged,  nor  any  securities 
held  in  sinking  and  other  reserve  funds. 

Note  D. — In  the  general  balance-sheet  statement  the  balance  in  this 
account  shall  be  stated  in  the  short  column  only. 

Note  E. — The  par  value  of  securities  issued  or  assumed  and  pledged 
for  purposes  other  than  that  of  security  for  funded  debt  or  short-term 
loans  shall  be  shown  in  account  No.  703,  "Sinking  funds";  No.  704, 
"Deposits  in  lieu  of  mortgaged  property  sold,"  No.  711,  "Special  de- 
posits"; or  No.  721,  "Insurance  and  other  funds,"  as  may  be  appro- 
priate. 

Note  F. — When  any  securities  have  been  actually  issued  to  bona 
fide  holders  for  value,  or  after  issue  by  another  company  have  been  as- 
sumed by  the  accounting  company,  and  after  such  issue  or  assumption 
are  reacquired  under  circumstances  which  require  that  they  shall  not  be 
treated  as  canceled  or  retired,  they  shall  be  included  in  account  No.  728, 
"Securities  issued  or  assumed — Unpledged,"  at  par  value;  the  difference 
between  the  par  value  and  the  amount  paid  in  reacquiring  such  securities 
shall  be  debited  (or  credited),  as  the  case  may  be)  to  Profit  and  Loss. 
If  such  securities  are  subsequently  pledged,  they  shall  be  included  in 
this  account.    (See  special  instructions,  sections  2  and  3.) 

CREDITS. 

751.  CAPITAL  STOCK. 

This  account  shall  include  the  total  par  value  of  certificates 
or  receipts  issued  to  represent  permanent  interests  in  the  ac- 
counting company,  or  interests  which,  if  tenninable,  are  so  only 
at  the  option  of  the  company. 

The  amounts  included  in  this  account  shall  be  divided  so  as 
to  show  the  par  value  of  (1)  certificates  (pledged  or  unpledged) 
held  in  the  company's  treasury,  by  its  agents  or  trustees,  or 
otherwise  subject  to  its  control,  including  both  those  reacquired 


448  APPENDIX  C 

after  actual  issue  and  those  nominally  but  never  actually  issued; 
and  (2)  certificates  issued  and  actually  outstanding,  being  those 
not  held  by  the  company,  its  agents  or  trustees,  or  subject  to 
its  control. 

The  amounts  included  herein  shall  be  further  divided  as  so 
to  show  the  amount  of  each  class  of  stock  issued,  as  follows: 

(a)  Common  Stock. — Stocks  which  have  no  preference  in 
distribution  of  dividends. 

(b)  Preferred  Stock. — Stocks  having  preference  in  distribu- 
tion of  dividends. 

(c)  Debenture  Stock. — Stocks  issued  under  a  contract  to 
pay  a  specified  return  at  specified  intervals. 

(d)  Receipts  Outstanding  for  Installments  Paid. — Re- 
ceipts for  payments  on  account  of  subscriptions  to  capital  stock. 
When  certificates  are  issued  for  amounts  so  paid,  the  par  value 
shall  be  included  in  the  account  covering  the  class  of  stock  for 
which  the  certificates  are  issued. 

Each  of  the  above  classes  shall  also  be  divided  into  subclasses 
according  to  differences  in  dividend  or  interest  rights,  voting 
rights,  or  conditions  under  which  the  securities  may  be  retired. 

Note  A. — When  a  general  levy  or  assessment  is  made  against  the 
holders  of  capital  stock,  requiring  the  payment  of  any  sum  for  the  use 
of  the  company  in  addition  to  the  consideration  agreed  upon  at  the  time 
of  sale,  the  amount  collected  upon  such  levy  or  assessment  shall  be 
credited  to  the  discount  and  premium  account  for  the  subclass  of  stock 
on  which  the  assessment  is  made. 

Note  B. — For  the  purposes  of  the  balance-sheet  statement  capital 
stock  is  considered  to  be  nominally  issued  when  certificates  are  signed  and 
sealed  and  placed  with  the  proper  officer  for  sale  and  delivery,  or  pledged, 
or  otherwise  placed  in  some  special  fund  of  the  accounting  company. 
It  is  considered  to  be  actually  issuM  when  it  has  been  sold  to  a  bona  fide 
purchaser  for  a  valuable  consideration,  and  such  purchaser  holds  it  free 
from  all  control  by  the  accounting  company.  All  capital  stock  actually 
issued  and  not  reacquired  and  held  by  or  for  the  accounting  company 
is  considered  to  be  actually  outstanding.  If  reacquired  by  or  for  the 
accounting  company  under  such  circumstances  as  require  it  to  be  con- 
sidered as  held  alive  and  not  canceled  or  retired,  it  is  considered  to  be 
nominally  outstanding. 

Note  C. — In  the  general  balance-sheet  statement  the  total  capital 
stock  included  in  the  account  shall  be  shown  in  the  first  short  column. 
The  amount  nominally  but  not  actually  issued  and  the  amount  nominally 
outstanding  shall  be  shown  in  the  second  short  column,  and  in  the  long 
Qolumn  shall  be  shown  the  amount  actually  outstanding. 


APPENDIX  C  449 

752.  STOCK  LIABILITY  FOR  CONVERSION. 

This  account  shall  include  the  company's  liability  under  agree- 
ments to  exchange  its  capital  stock  for  the  outstanding  securities 
of  companies  whose  physical  property  has  been  acquired  under 
such  agreements,  but  whose  securities  have  not  yet  been  sur- 
rendered for  exchange. 

753.  PREMIUM  ON  CAPITAL  STOCK. 

This  account  shall  include  the  total  of  the  net  credit  balances 
in  the  discount  and  premium  accounts  for  the  several  subclasses 
of  capital  stock.    (See  special  instructions,  section  2.) 

754.  GRANTS  IN  AID  OF  CONSTRUCTION. 

This  account  shall  include  the  estimated  money  value  at  time 
of  acquisition  of  land  and  other  grants  received  from  States, 
municipalities,  and  other  public  corporations  as  their  contribu- 
tions toward  the  construction  or  acquisition  of  property  the  cost 
of  which  is  chargeable  to  investment  in  road  and  equipment. 

755.  FUNDED  DEBT  UNMATURED. 

There  shall  be  included  in  this  account  the  total  par  value  of 
unmatured  debt,  maturing  more  than  one  year  from  date  of 
issue,  issued  by  the  accounting  company  and  not  retired  or  can- 
celed, and  the  total  par  value  of  similar  unmatured  debt  of 
other  companies,  the  payment  of  which  has  been  assumed  by 
the  accounting  company. 

The  amounts  included  in  this  account  shall  be  divided  so  as 
to  show  the  ^  par  value  of  (1)  certificates  or  other  evidences  of 
funded  debt  (pledged  and  unpledged)  held  in  the  company's 
treasury,  by  its  agents  or  trustees,  or  otherwise  subject  to  its 
control,  including  both  those  reacquired  after  actual  issue  and 
those  nominally  but  never  actually  issued;  and  (2)  certificates  or 
other  evidences  of  funded  debt  issued  and  actually  outstanding, 
being  those  not  held  by  the  company,  its  agents  or  trustees,  or 
subject  to  its  control. 

The  amounts  included  herein  shall  be  further  divided  so  as  to 
show  the  amount  of  each  class  of  funded  debt,  as  follows: 

(a)  Equipment  Obligations. — Equipment  bonds,  equipment 


450  APPENDIX  C 

notes,  or  car-trust  notes  secured  only  by  lien  on  specific  equip- 
ment. 

(6)  Mortgage  Bonds. — Bonds  secured  by  lien  on  physical 
property  and  not  includible  in  the  other  subdivisions  of  this 
account. 

(c)  Collateral  Trust  Bonds. — Bonds  and  notes  secured 
by  a  lien  on  securities  or  other  negotiable  paper;  and  stock  trust 
certificates  that  are  similar  in  character  to  collateral  trust  bonds. 

(d)  Income  Bonds. — Bonds  which  are  a  lien  on  a  carrier's 
revenue  alone,  or  bonds  which,  while  being  a  lien  on  its  property 
and  franchises,  can  claim  payment  of  interest  only  in  case  in- 
terest is  earned. 

(e)  Miscellaneous  Obligations. — All  funded  obligations 
not  provided  for  by  the  other  subdivisions  of  this  account,  also 
notes,  unsecured  certificates  of  indebtedness,  debenture  bonds, 
plain  bonds,  real  estate  mortgages  executed  or  assumed,  and 
other  similar  obligations  maturing  more  than  one  year  after  date 
of  issue. 

(/)  Receipts  Outstanding  for  Funded  Debt. — Receipts 
for  payments  on  account  of  funded  debt.  When  certificates  are 
issued  for  amounts  so  paid,  the  par  value  shall  be  included  in 
the  account  covering  the  class  of  funded  debt  for  which  the 
certificates  are  issued. 

Each  of  the  above  classes  shall  also  be  divided  into  subclasses 
according  to  differences  in  mortgage  or  other  lien  or  security 
therefor,  rate  of  interest,  interest  dates,  or  date  of  maturity. 
Parts  of  any  issue  agreeing  in  other  characteristics  but  maturing 
serially  may  be  treated  as  of  the  same  subclass. 

Note  A. — Securities  maturing  one  year  or  less  from  date  of  issue 
shall  be  included  in  account  No.  757,  "  Nonnegotiable  debt  to  affiliated 
companies,"  or  No.  758,  "Loans  and  bills  payable,"  except  that  where 
an  issue  of  securities  maturing  serially  over  a  period  of  years  contains 
short-term  obligations  such  obligations  may  be  included  as  funded  debt. 
Matured  funded  debt  shall  be  included  in  account  No.  764,  "Funded 
debt  matured  unpaid." 

Note  B. — For  the  purposes  of  the  balance-sheet  statement  funded 
debt  securities  are  considered  to  be  nominally  issiied  when  certified  by 
trustees  and  placed  with  the  proper  officer  for  sale  and  delivery,  or 
pledged,  or  otherwise  placed  in  some  special  fund  of  the  accounting 
company.  They  are  considered  to  be  actxiaUy  issued  when  they  have 
been  sold  to  a  bona  fide  purchaser  for  a  valuable  consideration,  and  such 


APPENDIX  C  451 

purchaser  holds  them  free  from  all  control  by  the  accounting  company. 
All  funded  debt  securities  actually  issued  and  not  reacquired  and  held 
by  or  for  the  accounting  company  are  considered  to  be  actually  outstand- 
ing. If  reacquired  by  or  for  the  accounting  company  under  such  circum- 
stances as  require  them  to  be  considered  as  held  alive  and  not  canceled 
or  retired,  thej^  are  considered  to  be  nominally  outstanding. 

Note  C. — Nonnegotiable  notes  having  a  maturity  of  more  than  one 
year  after  date  of  issue,  held  by  affiliated  companies,  shall  be  included  in 
account  No.  757,  "Nonnegotiable  debt  to  aflBliated  companies." 

Note  D. — In  the  general  balance-sheet  statement  the  total  unma- 
tured funded  debt  included  in  the  account  shall  be  shown  in  the  first 
short  column.  The  amount  nominally  but  not  actually  issued  and  the 
amount  nominally  outstanding  shall  be  shown  in  the  second  short  column, 
and  in  the  long  column  shall  be  shown  the  amount  actually  outstanding. 

756.  RECEIVER'S  CERTIFICATES. 

When  any  receiver  acting  under  the  orders  of  a  court  is  in 
possession  of  the  property  of  the  company  and  under  the  orders 
of  such  court  issues  evidences  of  indebtedness  chargeable  upon 
such  property,  the  par  value  of  such  evidences  shall  be  credited 
to  this  account. 

757.  NONNEGOTIABLE  DEBT  TO  AFFILIATED  COM- 

PANIES. 

This  account  shall  include  the  par  value  of  nonnegotiable 
notes  issued  to  affiliated  companies,  credit  balances  in  open  ac- 
counts with  such  companies  other  than  credit  balances  in  current 
accounts  classable  as  current  liabilities,  and  interest  accrued  on 
notes  and  open  accounts  included  in  this  account,  when  such 
interest  is  not  subject  to  current  settlements. 

This  account  shall  be  divided: 

(a)  Notes,  including  herein  not  only  nonnegotiable  notes  that 
run  longer  than  a  term  of  one  year,  but  also  such  notes  payable 
on  demand  or  within  one  year  from  the  date  of  issue  when  it  is 
mutually  agreed  that  the  notes  shall  not  be  enforced  as  current 
assets  by  the  holder. 

(6)  Open  accounts  not  subject  to  current  settlement. 

(c)  Interest  accrued  on  amounts  included  in  this  account 
when  not  subject  to  current  settlements. 

Note  A. — Accounts  with  affiliated  companies  which  are  subject  to 
current  settlements,  such  as  traffic  and  car-service  balances,  charges 
for  material  and  supplies  currently  furnished,  charges  for  repairs  to 


452  APPENDIX  C 

equipment,  etc.,  shall  be  classed  as  current  assets  or  current  liabilities, 
as  may  be  appropriate. 

Note  B. — No  item  shall  be  included  in  this  account  which  is  not 
known  to  be  the  property  of  an  aflBliated  company. 

Note  C. — The  term  affiliated  companies  includes: 

1.  Controlled  companies,  including  companies  solely  controlled  by 
the  accounting  company,  and  also  companies  jointly  controlled  by  the 
accounting  company  and  others  under  a  joint  arrangement. 

2.  Controlling  companies,  including  both  companies  solely  controlling 
the  accounting  company,  and  companies  which  jointly  control  the  ac- 
counting company  under  a  joint  arrangement. 

3.  Companies  controlled  by  controlled  companies. 

4.  Companies  controlled  by  controlling  companies. 

By  control  is  meant  the  ability  to  determine  the  action  of  a  corpora- 
tion. For  the  purposes  of  this  account,  the  following  are  to  be  con- 
sidered forms  of  control: 

(a)  Right  through  title  to  securities  issued  or  assumed  to  exercise  the 
major  part  of  the  voting  power  in  the  controlled  corporation. 

(6)  Right  through  agreement  of  some  character  or  through  some 
source  other  than  title  to  securities,  to  name  the  majority  of  the  board  of 
directors,  managers,  or  trustees  of  the  controlled  corporation. 

(c)  Right  to  foreclose  a  first  lien  upon  all  or  a  major  part  in  value  of 
the  tangible  property  of  the  controlled  corporation. 

{d)  Right  to  secure  control  in  consequence  of  advances  made  for  con- 
struction of  the  operating  property  of  the  controlled  corporation. 

(e)  Right  to  control  only  in  a  specific  respect  the  action  of  the  con- 
trolled corporation. 

A  leasehold  interest  in  the  property  of  a  corporation  is  not  to  be  classed 
as  a  form  of  control  over  the  lessor  corporation. 

Sole  control  is  that  which  rests  in  one  corporation. 

Joint  control  is  that  which  rests  in  two  or  more  corporations  and  which 
is  held  under  a  joint  arrangement. 

758.  LOANS  AND  BILLS  PAYABLE. 

This  account  shall  include  the  balances  representing  obliga- 
tions outstanding  in  the  form  of  loans  and  bills  payable  or  other 
similar  evidences  (except  interest  coupons)  of  indebtedness  pay- 
able on  demand  or  within  a  time  not  exceeding  one  year  from 
date  of  issue. 

This  account  shall  be  kept  in  such  form  that  the  amounts  of 
notes  secured  by  collateral,  payable  within  one  year  from  date 
of  issue,  may  be  reported  separately  in  the  corporation's  annual 
report  to  the  Commission. 

Note. — This  account  shall  not  include  obligations  which  mature  more 
than  one  year  after  date  of  issue,  or  demand  or  short-term  notes  issued 
to  affiliated  companies  and  includible  in  account  No.  757,  "Nonnego- 
tiable  debt  to  affihated  companies." 


APPENDIX  C  458 

759.  TRAFFIC   AND   CAR-SERVICE   BALANCES  PAY- 

ABLE. 
This  account  shall  include  the  net  amount  payable  to  other 
companies  in  favor  of  each  of  which  there  is  a  net  credit  balance 
in  the  total  of  the  accounts  representing  interline  freight,  pas- 
senger, and  baggage  revenues,  and  charges  for  equipment  inter- 
changed on  a  per  diem  or  a  mileage  basis. 

Note. — The  amount  to  be  entered  in  this  account  is  not  the  balance 
between  this  account  and  account  No.  713,  "Traffic  and  car-service 
balances  receivable." 

760.  AUDITED  ACCOUNTS  AND  WAGES  PAYABLE. 

This  account  shall  include  the  amount  of  audited  vouchers  or 
accounts  and  audited  pay  rolls  unpaid  on  the  date  of  the  balance 
sheet.  It  shall  include  balances  representing  unclaimed  wages 
and  outstanding  pay  and  time  or  discharge  checks  issued  in 
payment  of  wages  and  all  other  unpaid  vouchered  items. 

761.  MISCELLANEOUS  ACCOUNTS  PAYABLE. 

This  account  shall  include  outstandmg  drafts  drawn  by  station 
agents,  outstanding  drafts  drawn  on  the  company  in  settlement 
of  freight  claims,  conductors'  refund  and  extra-fare  checks  not 
presented  for  redemption,  deposits  of  affiliated  companies  sub- 
ject to  current  settlement,  unrefunded  overcharges,  and  other 
items  of  the  nature  of  demand  liabilities  not  covered  by  accounts 
Nos.  758,  759,  760,  762,  763,  and  764. 

Note. — The  amount  to  be  reported  under  this  account  is  not  the  net 
balance  between  this  account  and  account  No.  715,  "Miscellaneous  ac- 
counts receivable." 

762.  INTEREST  MATURED  UNPAID. 

This  account  shall  include  the  amount  of  matured  and  un- 
paid interest  on  loans  and  on  funded  debt  and  receiver's  certifi- 
cates, issued  or  assumed  by  the  accounting  company. 

Interest  which  matures  on  the  first  day  following  that  for 
which  the  balance  sheet  is  made  shall  be  included  in  this  account. 

Note. — Interest  matured  unpaid  on  nonnegotiable  debt  to  affiliated 
companies,  if  not  subject  to  current  settlement,  shall  be  included  in  ac- 
count No.  757,  "Nonnegotiable  debt  to  affiliated  companies." 


454  APPENDIX  C 

763.  DIVIDENDS  IVIATURED  UNPAID. 

This  account  shall  include  the  amount  of  dividends  payable 
on  capital  stock  but  unpaid,  uncalled  for,  or  unclaimed  at  the 
date  of  the  balance  sheet. 

Dividends  which  become  payable  on  the  first  day  following 
that  for  which  the  balance  sheet  is  made  shall  be  included  in 
this  account. 

764.  FUNDED  DEBT  MATURED  UNPAID. 

This  account  shall  include  the  amount  of  fimded  debt  ma- 
tured and  impaid  without  any  specific  agreement  for  extension 
as  to  time  of  pa\Tnent,  including  unpresented  bonds  drawn  for 
redemption  through  the  operation  of  sinking  and  redemption 
fund  agreements. 

765.  UN^UTURED  DrVTDENT)S  DECLARED. 

This  account  shall  include  dividends  declared  on  capital  stock, 
but  not  payable  until  after  the  first  day  following  the  date  of 
the  balance  sheet. 

766.  UNMATLTIED  INTEREST  ACCRUED. 

This  account  shall  include  the  amoimt  of  interest  on  loans  and 
on  funded  debt  and  receiver's  certificates  issued  or  assumed, 
accrued  to  the  date  for  which  the  balance  sheet  is  made,  but 
not  payable  until  after  the  first  day  following  that  date. 

767.  UNAIATURED  RENTS  ACCRUED. 

This  account  shall  include  rents,  under  leases  or  other  agree- 
ments, accrued  to  the  date  for  which  the  balance  sheet  is  made, 
but  not  payable  until  after  the  first  day  following  that  date. 
It  shall  also  include  the  amount  of  accrued  dividends  on  stock 
and  accrued  interest  on  the  funded  debt  of  other  companies 
when  such  dividends  and  interest  are  payable  by  the  accounting 
company  as  all  or  a  portion  of  the  rent  imder  leases  or  other 
agreements  with  those  companies. 

768.  OTHER  CURRENT  LIABILITIES. 

This  accoimt  shall  include  items  of  current  liabilitiea  not 
covered  by  accounts  No.  758  to  No.  767,  inclusive. 


APPENDIX  C  455 

769.  LIABILITY  FOR  PROVIDENT    FUNDS. 

This  account  shall  include  the  ledger  balances  representing 
the  liability  of  the  accounting  carrier  for  the  amount  of  the 
assets  (whether  contributed  by  the  company,  by  the  employees, 
or  by  others)  in  the  hands  of  its  treasurer  or  of  trustees  or  man- 
agers acting  for  it  in  the  administration  of  employees'  pension, 
savings,  relief,  hospital,  and  other  association  funds. 

Note  A. — This  account  shall  not  include  items  representing  funds  in 
which  the  accounting  company  has  no  beneficial  interest  and  which  it 
holds  purely  as  trustee. 

Note  B. — In  stating  the  balance  sheet  in  the  annual  reports  to  the 
Commission,  the  liability  for  provident  funds  which  are  carried  in  the 
current  cash  of  the  company  shall  be  included  under  current  liabilities, 
in  account  No.  761,  "Miscellaneous  accounts  payable." 

770.  OTHER  DEFERRED  LIABILITIES. 

This  account  shall  include  items  of  deferred  liabilities  not 
covered  by  account  No.  769;  such  as  retained  percentages  due 
contractors,  to  be  paid  on  completion  of  contracts;  deposits  for 
construction  of  side  tracks,  to  be  refunded  on  the  basis  of  an 
agreed  percentage  of  the  earnings  from  the  traffic  handled  over 
the  tracks;  and  other  similar  items. 

771.  TAX  LIABILITY. 

This  account  shall  include  the  amount  of  taxes  accrued  and 
charged  against  income  accounts  No.  532,  *' Railway  tax  ac- 
cruals"; No.  535,  "Taxes  on  miscellaneous  operating  property"; 
and  No.  544,  "Miscellaneous  tax  accruals"  in  excess  of  the 
amount  paid. 

If  the  taxes  paid  are  in  excess  of  the  taxes  accrued,  the  amount 
of  the  excess  shall  be  shown  in  red  in  this  account. 

772.  PREMIUM  ON  FUNDED  DEBT. 

This  account  shall  include  the  total  of  the  net  credit  balances 
in  the  discount,  expense,  and  premium  accounts  for  the  several 
subclasses  of  funded  debt.    (See  special  instructions,  section  3.) 

773.  INSURANCE  AND  CASUALTY  RESERVES. 

This  account  shall  include  the  net  credit  balance  in  the  ac- 
counts to  which  are  credited  specific  appropriations  of  income 
or  surplus  and  such  insurance  premiums  as  are  concurrently 
charged  to  Operating  Expenses  to  cover  self-carried  risks  on 


45^  APPENDIX  C 

fire,  fidelity,  boiler,  casualty,  burglar,  and  other  insurance,  and 
to  which  are  charged  losses  sustained  on  items  protected  by  such 
insurance. 

774.  OPERATING  RESERVES. 

This  account  shall  include  the  ledger  balances  representing 
reserves  created  by  charges  to  Operating  Expenses  for  main- 
tenance of  road  and  equipment,  for  personal  injury,  loss  and 
damage,  and  other  claims,  and  for  similar  purposes,  such  charges 
being  made  currently  for  the  purpose  of  equaUzing  charges  to 
operating  accounts  for  the  current  accounting  year.  (See  special 
instructions  for  operating  expenses,  sections  19  and  20.) 

Note  A. — Debit  balances  in  operating  reserve  accounts  to  be  cleared 
by  future  charges  to  operating  accounts  shall  be  shown  in  red  in  this 
account  in  the  carrier's  annual  report  to  the  Commission. 

Note  B. — The  credit  balances  in  reserve  accounts  representing  appro- 
priations of  income  or  surplus  for  sinking  funds,  etc.,  shall  not  be  in- 
cluded in  this  account. 

Note  C. — Accrued  depreciation  credit  balances  shall  be  included  in 
accounts  Nos.  775,  776,  or  777,  as  may  be  appropriate. 

775.  ACCRUED  DEPRECIATION— ROAD. 

This  account  shall  be  credited  with  amounts  charged  to 
Operating  Expenses  or  other  accounts  to  cover  the  depreciation 
of  fixed  improvements,  the  cost  of  which  is  included  in  account 
No.  701,  "Investment  in  road  and  equipment,"  or  in  account 
No.  702,  "Improvements  on  leased  railway  property." 

When  any  fixed  property  is  destroyed,  sold,  or  otherwise  re- 
tired from  service,  the  amoimt  included  in  this  account  with 
respect  to  the  property  retired  shall  be  charged  hereto. 

(Note  carefully  general  instructions  for  the  classification  of 
investment  in  road  and  equipment,  sections  7,  8,  11.) 

776.  ACCRUED  DEPRECIATION— EQUIPMENT. 

This  account  shall  be  credited  with  amounts  charged  to 
Operating  Expenses  or  other  accounts  to  cover  the  depreciation 
of  the  accounting  company's  equipment. 

When  any  equipment  is  destroyed,  sold,  or  otherwise  retired 
from  service,  the  amount  included  in  this  account  with  respect 
to  the  property  retired  shall  be  charged  hereto.  (See  text  of 
road  and  equipment  general  account  II,  Equipment.) 


APPENDIX  C  457 

777.  ACCRUED     DEPRECIATION— MISCELLANEOUS 

PHYSICAL  PROPERTY. 

This  account  shall  be  credited  with  amounts  charged  to  in- 
come or  other  accounts  to  cover  the  depreciation  of  property 
the  cost  of  which  is  included  in  account  No.  705,  ''Miscellaneous 
physical  property." 

When  any  miscellaneous  physical  property  is  destroyed,  sold, 
or  otherwise  retired  from  service,  the  amount  included  in  this 
account  with  respect  to  the  property  retired  shall  be  charged 
hereto. 

778.  OTHER  UNADJUSTED  CREDITS. 

This  account  shall  include  the  amount  of  credit  balances  in 
suspense  accounts  that  can  not  be  entirely  cleared  and  disposed 
of  until  additional  information  is  received,  such  as  amounts 
realized  from  the  sale  of  damaged,  unclaimed,  and  over  freight 
and  held  pending  claim;  switching  charges  of  other  carriers 
collected  and  held  awaiting  bills  from  such  carriers;  amounts 
received  from  the  sale  of  mileage  tickets,  to  be  disposed  of  as 
mileage  is  honored  by  the  accounting  or  other  carriers;  amounts 
received  from  sales  of  excess  baggage  scrip,  to  be  disposed  of  as 
coupons  are  honored;  interchangeable  mileage  credential  ticket 
redemption  funds;  revenue  overcharges  subject  to  refund;  credit 
balances  in  clearing  accounts  such  as  "Shop  expenses,"  "Store 
expenses,"  "Operating  gravel  pits,"  and  "Operating  quarries"; 
items  charged  to  Operating  Revenues  or  Operating  Expenses  on 
an  estimated  basis  in  accordance  with  general  instructions  for 
the  classification  of  operating  revenues  and  operating  expenses, 
section  2;  estimated  accrued  depreciation  on  leased  equipment 
(see  general  instructions,  section  2) ;  and  other  similar  items. 

779.  ADDITIONS  TO  PROPERTY  THROUGH   INCOME 

AND  SURPLUS. 

This  account  shall  include  such  amounts  of  income  and  surplus 
as  have  been  definitely  appropriated  or  set  aside,  and  expended 
since  June  30,  1907,  in  the  acquisition  of  property  the  cost  of 
which  is  included  in  property  investment  accounts  other  than 
those  for  securities  and  also  the  amount  of  donations  in  aid  of 


458  APPENDIX  C 

construction  made  by  individuals  and  companies  and  not  sub- 
ject to  distribution  as  dividends.  Investments  in  road  and  equip- 
ment, in  improvements  on  leased  railway  property,  and  in  mis- 
cellaneous physical  property  shall  be  shown  separately  in  the 
accounting  company's  records. 

This  account  may  also  include  amounts  definitely  appro- 
priated or  set  aside,  and  expended  prior  to  June  30,  1907.  If 
such  amounts  are  included,  the  account  shall  be  kept  in  such 
form  as  to  show  separately  amounts  expended  to  June  30,  1907, 
and  amounts  expended  since  that  date. 

Note. — Temporary  appropriations  of  current  funds  for  the  acquisition 
of  property,  the  cost  of  which  is  intended  later  to  be  met  through  an 
issue  of  securities,  shall  not  be  included  in  this  account. 

780.  FUNDED    DEBT    RETIRED    THROUGH    INCOME 

AND  SURPLUS. 
This  account  shall  include  the  total  amount  of  appropriated 
income  and  surplus  expended  in  the  discharge  of  the  principal 
(less  the  discount,  if  any,  suffered  at  the  time  of  sale)  of  any 
funded  debt  issued  or  assumed  by  the  accounting  company 
and  retired  through  sinking  or  other  funds  provided  from  income 
or  surplus.  The  account  shall  be  kept  in  such  form  as  to  show 
separately  amounts  expended  to  June  30,  1907,  and  amounts 
expended  since  that  date. 

Note  A. — Temporary  appropriations  of  current  funds  for  the  pay- 
ment of  obligations  which  are  intended  to  be  replaced  by  new  issues 
shall  not  be  included  in  this  account. 

Note  B. — Amounts  of  appropriated  income  and  surplus  expended  in 
retirement  of  trust  obligations  issued  for  the  purchase  of  equipment 
shall  be  included  in  account  No.  779,  "Additions  to  property  through 
income  and  surplus." 

781.  SINKING  FUND  RESERVES. 

This  account  shall  include  the  net  balances  in  accounts  to 
which  are  credited  definite  appropriations  of  income  and  surplus 
whether  held  in  general  funds  or  specifically  set  aside  in  the 
hands  of  trustees  for  sinking  and  redemption  funds.  It  shall 
also  include  income  accretions  to  such  funds  retained  therein. 
(See  income  account  No.  552,  "Income  applied  to  sinking  and 
other  reserve  funds.") 


APPENDIX  C  459 

782.  MISCELLANEOUS  FUND  RESERVES. 

This  account  shall  include  the  net  balances  in  accounts  to 
which  are  credited  definite  appropriations  of  income  and  surplus 
specifically  set  aside  in  the  hands  of  trustees  and  not  provided 
for  elsewhere.  It  shall  also  include  income  accretions  to  such 
funds  retained  therein.  (See  income  account  No.  552,  "Income 
applied  to  sinking  and  other  reserve  funds.") 

783.  APPROPRIATED    SURPLUS    NOT    SPECIFICALLY 

INVESTED. 

This  account  shall  include  the  net  balances  in  accounts  to 
which  are  credited  appropriations  of  income  and  surplus  held  in 
general  funds  for  definite  purposes  not  provided  for  elsewhere, 
but  for  which  no  specific  investment  or  segregation  of  assets 
has  been  made. 

784.  PROFIT  AND  LOSS— BALANCE. 

This  account  shall  include  the  balance  at  the  close  of  the  fiscal 
period  as  shown  in  the  accounts  provided  in  the  classification 
of  profit  and  loss  accounts. 


INDEX  TO  TEXT 


Abandoned  property,  illustra- 
tions of,  78,  79;  accounting 
treatment  of,  81 ;  when  charge- 
able to  surplus,  82;  treatment 
of  on  balance  sheet,  185 

Absorbed  charges,  113 

Accountant,  administrative  re- 
sponsibilities of,  12;  as  an 
historian,  13;  dual  responsi- 
bility of,  19;  responsibiUties 
of,  limited  to  transactions,  143 

Accounting,  leads  to  definite 
conclusions,  9;  is  a  process  of 
reasoning,  10;  practical  view 
of,  11;  balance,  meaning  of, 
14;  scientific  character  of,  16 

Accounting  rules,  compelling 
character  of,  16,  18,  19;  ac- 
counting units,  26 

Accruals,  basis  of  accountant's 
work,  87;  revenues  are  ac- 
cruals, 110 

Accruals,  distinguished  from 
cash,  18;  treatment  of,  on 
balance  sheet,  183 

Additions,  definition  of,  69; 
reasons  for,  70,  71,  72;  mini- 
mum of  for  charges  to  capital, 
84 

Advance  payments,  treatment  of 
on  balance  sheet,  184 

Amortization  of  discounts,  147 

Analysis  of  surplus,  steps  in,  155 

Appropriations,  accounting  treat- 
ment of,  147;  two  kinds  of, 


155;  classification  of,  156;  for 
improvements,  157;  for  re- 
duction of  capitalization,  160; 
for  extinction  of  discounts, 
161;  for  dividends,  161 

Assets,  current,  179;  limited  to 
twelve  months,  180 

Associations,  railway,  5 

Auditor,  influence  of  on  con- 
struction accounts,  43 

Balances,  meaning  of,  14;  the 
four  fundamental,  15;  net, 
used  for  interchanged  equip- 
ment, 139. 

Balance  sheet,  definition  of,  163; 
form  of  statement  of,  165; 
offsets  on,  179 

Betterments,  definition  of,  69; 
reasons  for,  70,  71,  72 

Bonds,  entries  of,  on  balance 
sheet,  at  par,  177 

CapitaUzation,  reduction  of 
through  surplus,  160 

Capital  liabilities,  analysis  of, 
177 

Cash,  distinguished  from  ac- 
cruals, 18;  basis  of  construc- 
tion charges,  47 

Classification  used,  36,  37,  36 

Clearing  accounts,  64 

Compensation,  for  improve- 
ments of  leased  property, 
173 


461 


462 


INDEX  TO  TEXT 


Construction  accounts,  influence 
of  operation  on,  44;  treatment 
of  labor  and  material  in,  49 

Construction,  29;  accounting  for, 
confined  to  physical  property, 
39;  rule  for  closing  period  of, 
41;  primary  accounts  of,  42 

Contracts,  an  accounting  unit, 
28 

Corporation,  the  railway,  rela- 
tion of  to  accounts,  34 

Corrections,  entries  for,  charge- 
able to  revenues,  112;  entries 
for,  carried  through  profits 
and  loss,  153 

Cost,  of  construction,  distin- 
guished from  investment,  46; 
of  road  purchased,  treatment 
of,  48;  of  property,  not  re- 
duced on  account  of  deprecia- 
tion, 172 

Cost  of  revenue,  direct  distin- 
guished from  total,  137 

Cost  theory  of  rates,  pernicious 
influence  of,  123 

Credits  during  construction,  61 

Credits  to  income,  142 

Current  assets,  meaning  of,  165; 
Current  liabilities,  meaning 
of,  167;  subject  to  rule  of  ac- 
cruals, 183 

Deferred  items,  treatment  of  on 
balance  sheet,  183 

Delayed  credits  and  debits,  car- 
ried through  profit  and  loss, 
153 

Depreciation,  excluded  from  con- 
struction cost,  59;  no  credit 
for,  to  property,  allowed,  60; 
pertains  to  operating  expenses, 


94;  arguments  for,  96,  97,  98; 
rate  of,  99;  installation  of,  for 
an  old  property,  104;  reserve 
on  balance  sheet,  172;  re- 
serves, 188 

Developmental  cost,  not  in- 
cluded in  construction,  39 

Discount  on  securities,  treatment 
of  on  balance  sheet,  184 

Discounts,  excluded  from  con- 
struction cost,  53;  amortiza- 
tion of,  147 

Dividends,  must  be  paid  out  of 
earnings,  17 

Division  of  labor,  influence  of  on 
classification  of  costs,  43 

Eflaciency,  struggle  for  brings 
standardization,  4 

Engineering,  three  kinds  of,  30 

Entrepreneur's  interest  in  ac- 
counts, 35 

Equipment,  hire  of,  139 

Express  companies,  declared 
common  carriers,  23 

Extensions,  definition  of,  68; 
made  out  of  surplus,  157 

Funds,  held  in  trust,  174 

General  expenses,  91 
General    manager,   his   concep- 
tion of  maintenance,  91 

Improvements,  on  leased  lines, 

173 
Incidental  revenues,  two  classes 

of,  117 
Income  account,   definition  of, 

126;  Income  statement,  form 

of,  127,  129 


INDEX  TO  TEXT 


463 


Income,  distinguished  from  rev- 
enue, 128;  special  credits  to, 
142;  gain  or  loss  of  securities 
held,  carried  to,  144;  debits 
to,  145;  delayed  items  of,  car- 
ried through  profit  and  loss, 
153 

Increasing  returns,  law  of  ap- 
plicable to  transportation,  131 

"Instrumentalities,"  meaning  of 
in  law,  24 

Insurance  reserves,  186 

Interchange  of  cars,  139 

Interchange  of  freight,  demand 
for  brings  standardization,  4 

Inter-corporate  accounting,  6 

Interest,  an  item  in  construction 
cost,  52;  a  debit  to  income, 
145 

Inter-divisional  accounting,  6 

Inter-industrial  accounting,  7 

Interstate  Commerce  Commis- 
sion, accounting  orders  of,  20 

Investment,  distinguished  from 
cost  of  construction,  46 

Joint  facility  accounts,  services 
rendered  by,  107;  in  revenue 
accounts,  115;  in  expense  ac- 
counts, 105;  in  rent  accounts, 
141 

Land,  an  item  in  construction 
cost,  50 

Lane,  FrankUn  K.,  46 

Lease,  exclusive,  134;  which 
carry  partial  use  of  property, 
136;  leased  property,  im- 
provements on,  174 

Liabilities,  current,  179;  limited 
to  twelve  months,  180 


Maintenance  accounts,  88; 
meaning  of  92;  general  man- 
ager's definition  of,  92;  finan- 
cier's definition  of,  93;  ac- 
countant's definition  of,  93 

Materials  and  suppUes,  181 ;  not 
subject  to  twelve  months' 
rule,  182 

Offsets,  on  balance  sheet,  179 

Operation,  influence  of  on  classi- 
fication of  construction  costs, 
45;  of  property  not  used 
for  transportation,  accounting 
treatment  of,  142 

Operating  expenses,  definition 
of,  86;  accounts  of  are  ac- 
cruals, 87;  growth  of,  88 

Operating  revenues,  definition 
of,  109;  legal  character  of,  110; 
corrections  chargeable  to,  112; 
charges  absorbed  by,  113; 
from  water  lines,  how  treated, 
118;  classification  of,  prin- 
ciples controlling,  121 

Operating  reserves,  187 

Organization,  30;  five  phases  of, 
31,32 

PersonaUty,  accounting  signifi- 
cance of  business,  34 

Premium,  on  stock,  how  treated, 
178 

Prices,  influence  of  change  of,  on 
value  of  property,  75 

Private  car  lines  brought  under 
accounting  control,  23 

Profit,  when  an  income  credit, 
143 

Profit  and  loss,  definition  of,  148, 
151;  form  of  statement,  152; 


464 


INDEX  TO  TEXT 


correction  entries,  152;  may 
accept  amortization  charges, 
147;  miscellaneous  gains  and 
loss  and,  153;  appropriations 
and,  155 

Property  not  used  in  transporta- 
tion, 142 

Purchase  of  road,  65 

Railway,  accountant's  definition 
of,  25;  railway  functions,  an 
analysis  of,  29 

"Railroad"  defined  to  cover 
"instrumentalities"  for  han- 
dling traffic,  24 

Real  estate,  an  item  in  con- 
struction cost,  50 

Renewals,  treatment  of,  73,  76 

Rents,  treatment  of,  132;  four 
classes  of,  133;  a  debit  to  in- 
come, 145 

Reproduction  value,  not  invest- 
ment cost,  40 

Reserves,  depreciation,  102;  in- 
surance, 186;  operating,  187; 
secret,  191 

Revenues,  during  construction, 
63;  from  water  fines,  118;  dis- 
tinguished from  income,  128; 
incidental,  two  kinds  of,  117; 
cost  of,  when  earned  by  leased 
property,  137 

Road  and  equipment  accounts, 
36 

Road  piu-chased,  entered  on  cost 
basis,  48 

Science,  accounting  is  a,  16 
Scientific  spirit  brings  standard- 
ization, 5 


Securities,  devahdated  by  credits 
for  depreciation,  60,  61;  inter- 
corporate holdings  of,  135; 
profit  or  loss  on,  carried 
through  income,  144;  held  in 
sinking  fund,  178;  dupHca- 
tion,  treatment  of,  179;  held 
in  treasury,  treatment  of, 
186 

Sinking  funds,  174;  treatment  of 
securities  held  in,  178;  re- 
serves for,  190 

Sleeping  car  companies,  declared 
common  carriers,  23 

Special  service  trains,  120 

Steam  raUway,  see  Railway 

Stockholder,  relation  of  to  ac- 
counts, 35 

Stocks,  owned,  when  a  quick 
asset,  176;  entries  of,  on  bal- 
ance sheet,  at  par,  177 

Stores  accounts,  181 

Surplus,  uncertainty  in  analysis 
of,  150;  abiUty  to  analyze, 
test  of  sound  accounting,  155; 
improvements  through,  157; 
treatment  of,  on  balance  sheet, 
189 

Switching,  the  car  the  unit  of, 
120;  expenses  for,  absorbed, 
113 

System,  railway,  the  operating 
unit,  5;  use  of  leases  in  the 
building  of,  134,  175 

Tax  accruals,  128;  treatment  of, 
130 

Taxes,  law  of  increasing  return 
not  appHcable  to,  131 

Telegraphs,  brought  under  ac- 
counting control,  23 


INDEX  TO  TEXT 


465 


Telephones,  brought  under  ac- 
counting control,  23 

Time-hmit,  in  accounting,  126 

Trafl5c  expenses,  90 

TraflSc  manager,  influence  of  on 
revenue  accounts,  122 

Transportation,  an  organized 
unit,  4;  agencies  of,  23;  law  of 


increasing  returns  applicable 
to,  13;  expenses  of,  90 
Trust  deposits,  175 

Unadjusted  items,  treatment  of, 
on  balance  sheet,  183 

Water  line  revenues,  two  kinds, 
119 


THIS  BOOK  IS  DUE  ON  THE  LAST  DATE 
STAJMPED  BELOW 


RETURN               MAIN  CIRCULATION 
TO^ 

ALL  BOOKS  ARE  SUBJECT  TO  RECALL 
RENEW  BOOKS  BY  CALLING  642-3405 

DUE  AS  STAMPED  BELOW 

FEB  21 1996 

• 

FEB  2  0  i.qc5fi 

Ti.^ w t. ^  V  '-.■--' 

JUN  2  b  tu5 

C»RGULAT!ON  '  ■!"- 

^  ( 

UNIVERSITY  OF  CALIFORNIA,  BERKELEY 
FORM  NO.  DD6                                BERKELEY,  CA  94720 

YC  25359 

U.C.BERKELEY  LIBRARIES 

CD5bD7a3D3 


UNIVERSITY  OF  CAUFORNIA  LIBRARY 


f  ^   ->.«■»  .^    «  ■    ■» 


